Q2 2020 Controladora Vuela Compania de Aviacion SAB de CV Earnings Call
Please standby will begin shortly.
[music].
Good morning, everyone and welcome and thank you for sending bite and welcome to <unk> second quarter 2020 financial results Conference call.
Lines are not listen only mode.
Following the company's prepared commentary well open the call for your questions answered.
Instructions on how to ask your question will be provided at that time.
Please note that these events been recorded.
I'd now like turn to go over to make money and they're not all that he can <unk> corporate finance and Investor Relations director.
Please go ahead Mr., what do you guys.
Good morning, everyone and thank you for joining.
Oh today, <unk>, president and CEO ever get a stunning.
Early next decade as vice President.
Rocket science, and our senior Vice President.
Chief Financial Officer, Hi missile.
He will be discussing the company's second quarter 2020 Russell.
Afterwards.
I'll answer your question.
Please note that this coal is for investors and I know they oh.
Any questions from the media will be taken an individual face.
Before we begin.
Let me remind everyone that this call may include forward looking statements, putting the meaning of optical securities laws.
Forward looking statements are subject to several factors that could cause the company's actual results could differ materially from expectations for legal subscribers in the company's filings with the U.S. Securities and Exchange Commission and the commission that you're not got either.
Furthermore, Larsen there's takes no obligation to publicly update or revise any forward looking statement.
Now my pleasure to turn the call over double our president and CEO Mr. every get us Arnie.
[noise] since you've already Linda.
Thank you very much for everybody for joining also hope everybody. So.
I want to start eating a special mention lower somebody's Messrs Board members.
Before we committed to companies who their service fashion and litigation during these difficult situation, which has served.
Yes George.
We have taken to formally fivek, where actions to address the back to school. These ideally new regions.
We first.
Easily gently manager wouldn't liquidity position sick when you delever the conservative lens to seize the boxes that could be they deal with great flexibility.
Third we achieved a sosh recovery terms with the basi for will be thank you provided you need to further reduce costs.
Finally, see we missed the C.
Mitch.
Let me start by the first one where we diligently manage or when do we didn't see.
We're very certain work cashing, Patrick Lynch decision $436 million.
Yes, it's very similar levels to the position at the end of the first quarter. Despite an 82 year on year results should be ready.
82%.
The company given the circumstances, that's taken decisive actions to persist gosh [laughter] do you want.
Did you gently match or where do you will see should by calling the variable costs and taking an extreme discerning examination door almost fixed costs.
The agreement be benefit.
<unk> definitely good business. It go forward liquidity preservation plan for 2020, he's doing a $66 million, mostly made mistakes or else would mean suppliers aircraft engines this source and airport.
Are these are not anywhere were able to postpone over $200 million over the next wouldn't have years capex requirements.
Okay great.
[noise] the synchronized it is we deliberately conservative these plans to phasing back so that will be 19 with most of it.
We sharply curtailed our fleet expansion.
You never she had an amendment will lead to LIBOR schedule with their most halt.
You know number to serve rest of July 2023.
Actually one of them see DHL.
Which provides for nicely conservative contractual studies.
The flexibility for folks who needs to grow to state Street operating leases up would be pardon me.
Given that our unit cost remains our main business driver will be replacing the old shows with new fuel efficient neo aircraft.
So we know we're growing percentage of Nielsen leads 60% by 22 any sort of.
Yes, you made these improvements will bring additional don't know fuel burn savings of approximately 5%.
Since the currencies.
Third we achieved the fast recovery in terms of goodbye.
I was hoping will further elaborate there are five main reasons that explains why velocities was able to wrap up 60% of its capacity in July.
No 70, percents walls versus do regionally.
<unk> schedule.
The first when is the spreads of all would be if our cross incorporated an important <unk> network, which is the market segment that has recovered the buttons.
The second is a strong domestic Mexican lease your market recovery. The series. The very are these basiji marketing campaign.
Before less competition in the Mexican market and find out the fees went deeper cost reduction cost reduction initiatives, which have strengthened our who's done no cost dropped.
And then.
The company's might be for why is it would be to further reduce costs.
Well there last year and has the company has worked.
Cost structure, because the lowest unit cost to breed or in the Americas and there's no amongst the lowest cost you fairly.
Well use cost there doesn't seem to work.
We have seized that opportunity in the current grocers to students in old question.
See we'd have negotiated cost reductions would more than three 160 suppliers and have temporarily switched material 60 minutes agreement.
To that far in ski.
Well, there's usually a network or leave looks like craft is based in a variable compensation bear out.
So it's nowhere more BARDA <unk> cost structure will allow the company to better would stand thresher revenue environment and provided greater ability to run.
Finally, I'd say said, we implemented safety and health admissions.
Operationally, what was the safety or fundament doesn't just.
We are gone passing all of our fixed airports to ensure that well being of word artist just personnel.
Yes.
We have implemented next easy communicated in the new bio security and prevent these measures. So that we can continue to offer the best traveled excuse.
We will continue to off these protocols.
The best International practice today, you see.
Let me pass it over to order like <unk> Executive Vice President corporate and I didn't say.
Good afternoon revenues handle your commercial strategy will be implemented.
Okay.
One other please thank you and weekend.
The second quarter had an extremely challenging macro environment and despite that we achieved the following topline figures.
Passengers booked in the second quarter was 1.1 million with a healthy knows factor.
In the domestic markets the book load factor was 77.8%.
International market it was 86.3%.
The capacity reductions in April and May resulted in higher load factors and we need to observe a high percentage of no shows in some markets.
Due to the no shows the average onboard the old was 60% for the theory.
Try them for the second quarter reached 4.7 dollars center.
With a year on year decreased 34%.
Total ancillary revenue per passenger reached 644 basis for the quarter, an increase of 25% year over year.
Absolutely no counsel, 46.6%, though total operating revenues.
Given by resiliency, ignoring the air absolutely touches the co branded credit card.
However.
Total ancillaries decreased 76% year over year to the reductions in capacity.
In terms of operational reliability on time performance was 95.7 cents for the second fourth.
The second quarter of Twentytwenty was characterized by three very different spots.
In April and May the demand failed and required significant capacity cuts.
This trend was reversed in June when will ours was able to start increasing its capacity.
Taking advantage of early signs of recovery, particularly in the domestic market.
Despite low levels of operations enjoyable ours ramp up was significantly faster than that of our domestic competitors.
In April 2024 hours operated 18% A.S. EMS versus the same period of 2019.
In may the sales trends up to 12%, whereas in Jordan will ours operated 41%.
On top of more than 230% compared to May 2020.
The domestic market held up better than the international markets and Central America remained closed altogether.
Well the ramp up in June and further into the third quarter, well ours has taken a bread overcame approach to network recovery.
Focusing on marginal contribution full flight.
By the end of June 2020 service restart in 49% of domestic routes and 22% of U.S. markets, albeit both at the lower frequency versus 2019.
In the second quarter, because we had excess capacity marginal contribution was used at the main makes week, when making capacity decisions as cash flow takes priority.
In addition, we extended our casual publications out to October 2021 to help cashing fields on the sales side. This was supported by heavy promotional activities to further push about sales.
We announced five new domestic routes from Mexico City to the following cities, Saudi on to that the economy compared to some FICO and be I'm also.
For the third quarter, we expect a gradual ramp up of operations with 60% of capacity operated into light and approximately 70% to the operating oldest versus the same period last year.
This represents an increase of 55% of capacity compared to the second quarter most twentytwenty.
To date.
Hi has 229 daily operations at 39, domestic and 16 international airports.
Again.
We have proven that that you will see see model is the most affected in the market.
No more than ever we have the opportunity to compete directly with buses why also back seating capacity left on served by all the airlines that are reducing their costs they operation.
Why do we have a weak economy in the U.S. and Mexico, No air fares come even more important.
Oh no cost structure.
Just to offer a low base pairs to a point to point network.
This gives us an unparalleled competitive position that supports our market leadership.
Regarding customer segments, we observe some keep saying.
Do you follow markets have seen the fastest recovery followed by leisure.
Let's see if his words remained depressed.
VSR at leisure loads also I've seen a better recovery in fares why business will face fares have recovered much less.
And the case in point.
The if our customers don't need to stay in hotels, because they're staying with friends and family. So they are much more likely to venture out.
This topic has seen a relatively strong increases crisis is as well.
That's for the leisure traveler, except to the beach cannot be replaced by a video conference call.
We also acquired carrying cost conscious entrepreneurs off small and medium sized enterprises.
This traffic has also performed relatively well.
The VSR and price sensitivities are segments, Lars core customer segments, which positions us much better you know recovery.
We remain focused on embracing growth opportunities in card market.
And your older fees and ancillary revenues.
We strongly believe that these crises handing out or was it a lifetime opportunity to rapidly move our business forward for the benefit of our customers and shareholders.
As mentioned in the last earnings call, we have significantly advanced on digital initiatives.
We have seized the opportunity to implement some key ticking up technology advancements to better position us for the ramp up.
We have upgraded to the latest version of new Sky Navitaire reservation platform.
We have launched a new will ours dot com with a similar experience.
After load times additional functionality and more flexibility.
This also includes a new with progressive App ideally suited for entry level smartphones.
We have adopted our digital platform and web services to satisfy our currency overwhelmed call centers for example by adding walk up and all the messaging functionalities that bypass the call Center.
We have reinforced communication to direct customers to the wet and guide them through the flight online change process.
These upgrades complement our boss switching idea far strategies by making it easier for customers in those segments to book and execute yeah that mobile phones.
Another important part of the ramp up of operations has been.
To give passengers peace of mind.
When traveling with what Larry.
In May we launched at comprehensive communication camping and tied to.
Ladies seafood away less which is based on Threed brand promise is number one safety through it reinforced bio security protocols.
Second more flexibility.
As you recall more that offers unlimited change.
Third affordable airfares compete with buses.
And the last few months.
The last few months have been at peak burden on the customer service team due to a large increasing volumes for flight changes cancellations and Boucher issuance.
In the early days of the quarter, we did not always achieved the service levels, we strive for.
We quickly adopt it's more self service technologies and approved says levels.
Full flight cancellations.
Our capacity decreases.
We have been offering to customers alternative options of which the most popular has been a travel boucher, 425% of the original purchase price.
This has also helped our cash stock.
Since March 15th until June Thirtyth over 535000 changes have been made by customers themselves.
Oh, well artist Dot com.
And another 372 thousands were made to the call center.
This means that approximately two thirds of our customers.
Yeah. It actions were fully optimized.
In the second quarter.
Well ours has issued electronic vouchers, we the value of approximately 6% last 12 month sales.
From this amount.
9% have already been begins by cost.
We believe that well ours is well positioned for the recovery.
Based on experiences in Asia, and Europe for the year end of 2020, we currently expect the Mexican domestic market demand as a whole.
Reached 65% to 75% last years levels.
What we have no better insight at this moment and therefore cannot exactly predict the pace of the recovery.
A lot of has prepared itself commercially.
Operationally and financially to take every opportunity that we can.
In summary.
Well it will cost many of them variable you bought a greater ability to withstand pressured rather than get fired.
As we ramp up we are working on recapping the productivity on the feet measured in eight cents per aircraft per day.
This will improve CASM during the recovery.
We service customer segments that have to more resilient.
Recovering softer than other segments.
Remittances to Mexico that jumped to its second highest level in may.
Records began in 1990 sites.
Well I was just trying to digital platforms by taking advantage of is oh, the slowdown and to be ready for the recovery by highlighting our super low fares.
We have doubled down on boss switching campaigns in order to stress the advantage of traveling by airplane doing this health emergency.
Faster.
Healthier and less expensive.
Well just may have poor ventilation and hygiene measures and an agency.
40% of Polaris roads before the pandemic had no air competition was just direct bus competition.
The Mexican my thoughts market is about 70 times the size of the domestic air traffic market [noise].
Well, obviously not spare any efforts to convert boss travelers.
And they're also new opportunities emerging to operate more increases he capacity constrained airports.
Opportunities also opening up in Central America.
I just went up there any efforts to tackle profitable opportunities.
These factors have already resulted in a strong market position formulary.
Before the end they make.
Well ours domestic market share was around 30%.
Whereas in June it had grown to approximately 50%.
No.
I'd like to turn the call over to our Chief Financial Officer, Hi, suppose to discuss our financial performance for the quarter.
Thank you hold or.
Now I will continually discussion of Horace holes in accordance with a few years file with the Securities and Exchange Commission income each unless somebody like God Yeah Yeah.
Let me start by saying that he has been a pleasure to lead involving the finest field.
In this challenging period, such talented will always calls.
A summary of what our team has achieved in the last three months.
Yeah.
Total operating revenues for the second quarter reached 1.5 billion vessels, representing an increase of 32% versus 2019.
Our focus was on operating old flights were talking about contributions before said gosh.
I mean, the second quarter CASM ex fuel was 10.0 treat you a sense.
Oh I'm told US dollar CASM was 11 point. So many for you a sense an increase of 80% versus full dose and I think.
Even by every player lower aircraft utilization for me, Mike viable cost I'm Freestor gosh.
And second quarter over the years the leader at an operating loss of 2.3 billion pencils.
And they got people operating margin of 154 cents.
Please note that I FRS required the company to fully recognize some expenses.
Irene on track for a month or on a couple of basis, notwithstanding and Feynman deferrals or do we have a thing.
ITAR in the second quarter was negative 470 million pencils.
And you get the volume of negative 30 point they were saying.
We reported a net loss for the second quarter of 1.6 million vessels with a negative net margin of one called you had 7.74 cents.
Exchange rates appreciation Ludhiana over the second part there led to a non cash ethics net gain of 1.1 being the best won't be low you're breaking like.
Football, where let us dollar money sorry liability position.
Despite the reduction in revenue.
During the second part there the net cash flow generated by operating activities was five foundries and maybe for no best.
The net cash flow using investing activities reached 71 million vessels.
The net cash flow used in financing activities was 1.2 medium bus.
Well, they first hassle to you or Larry's, how the operating cash flow generation of 3.4 billion pencils.
Well ladies.
The strongest balance sheet brawl fighting amongst the Mexican colliers.
At the end of the second quarter.
Company Register a negative net debt.
4.6 billion, that's excluding them these liability recognize on them for a 16 adoption.
Did you say same by three factors.
Nonrestricted cast level of 10 million vessels.
A short time working capital facility, a 40 200 million vessels.
Third I guarantee you, we ballgame find national line.
Free delivery business established for fleet replacement and expansion of 3.7 deals vessels and the locum bond of 1.5, even faster.
The company does not have any that somewhat decision they match deal this year.
Well they said were local ball there are no principal payments due in the next than most and the company had their resources to service all these contractual obligations.
Or Larry net debt to eat surveys show tells the second quarter a fight for several times.
Selecting a healthy and solid balance sheet a for the industry standard.
Oh, sorry says financial debt you sold the Queen besting movies.
Our fuel expense line during the quarter continues to benefit from the recent although dauphine gently prices.
Fight the fuel hedge position previously plays.
As I said to quickly I.
So June 30.
Cash cash equivalents were 10 billion vessels, representing 35% last little mall, so for breaking betting.
Despite the existing we didn't feel the company, we believe that increasing our cash position will allow us to take advantage of phone precedented opportunity.
Consequently, the next 18 months, we will be evaluating bargains opportunistic like nothing other than that.
She is the Cobiz 19, Contingence you started.
Our main objective has been to preserve the company's liquidity position.
I certainly can mention.
We have implemented said on liquidity preservation blood.
Which has been he was a thought on those 6.1 billion barrels to Bateman deferrals and cost reduction.
Tell cinnamon flavor.
Our route 1.6 billion vessels, where differ for 2021.
We have reduced capital expenditures for meaningful and God nonessential expenses for the rest of the year.
Service, multiple where women with their goals, which they quickly first 20 aircraft into 2027 and 2028, we suppose phone.
$200 million, you free delivery basements or even on schedule for 2000, 2021, I'm pointing to.
Additionally, or would you can probably fall asleep language. There was allow us to maintain a cautious leap that will remain at 87 aircraft net of new entrants Larry until 2014 free.
I would mean pdps requirements during the second half of 2000, and Blaine 21, 22 are covert throughout we're seeing nice if you have sealy d., we sent them that I'm banquet mix.
Especially <unk> for the second quarter, where liquidity preservation plan provided 2.2 helium fascinating Ben.
Of which three called me I'm 57 media vessels, where it costs, a boy that and the rest repayment.
The company the all its number of payables. They somehow I saw this whole typically we did see preservation plan.
Through the scrutiny of our Treasury War room, we mean my somewhere Casper.
For the third quarter, we expect our monthly cash burn to watch between 40.
And $45 million.
In the face of these industries is Russia. The company is not providing guidance on earnings.
We will however.
Identify or radius fungus work to preserve cash and to continue finding then lamenting additional cost cutting measures.
I'll pass it back to Enrique for closing remarks.
Thank you very much higher well, let us continue supporting national wounds. Your entities, we have kind of sport <unk> health. It we've been and continue gardening medical personnel.
Part of our whatever you want to use our program.
The company has taken every action responds to the current contingents.
No. This was let's see the I would refer us where another hesitating maybe difficult decisions to ensure the long term success what were.
We're confident that the we continue preserving our cash operating with our news the delivery and brotherly repayment schedule.
No we're focused on taking off and dropping off the business through the lowest pursing the market.
Getting back customers demand and as a result of recovery in the U.S sense Bruce.
The company has an internal cost business, both within and Bilive competitive position, we're fully that their minds take all the opportunities presented in the Mark.
I do not want to finish to a.
So you didn't valuable and his family for their tireless surface.
Men in the challenging environment.
But there's also be group of people that I want to say.
I want to express my gratitude, where to source or were you does years.
Our suppliers of business partners, who have been supportive to the company who these crisis. They leave you know where business mode, but most important them and then easy they'd be leaving our body.
We pressure there these long term relationships and will always remember their comprehensive collaboration in this challenging died.
This management is more than that are committed to some ses.
To succeed. Thank you very much operator, please open the lines, where I noticed for questions.
Hi, Steve Seim, if he would like topic question. Please press star one on your Touchtone phone.
Yeah, we try your question any time pricing.
<unk>.
Once again to ask a question Kleanthis star and one Touchtone phone.
We will pause a moment to allow questions to Q.
Go ahead is playing September please.
[laughter].
First question comes from doing Penny wise with Evercore ISI. Please go ahead. Your line is open.
Hi, good morning, Thank you.
Maybe one for holder to start up now now that you're ramping to 60% in July 70% in August and I don't know if you mentioned September how our loads holding up.
Yeah, I assume you're not going to have as many no shows so maybe the right comparison is versus the 60%.
Onboard load factor into Q.
Thank you Duane.
No it does.
Given any guidance on September yet, we're still working on the schedule.
Regarding load factors as we increase capacity the book load factors are little bit lower than what we've seen in may.
Or even June when we when we reduce some capacity significantly.
So so you'll see I onboard loads, but probably little bit lower close.
Okay, great that no. So is it precisely because then also is lower than in previous ones.
And I just wanted to follow up on.
No what what a lot of the airlines here called advanced ticket liability and in European L.. It's it's on earned revenue it looks like that increased nicely sequentially.
Can you just talk about what drove that and how much of the expansion.
It was due to your schedule extension through October of next year. Thanks.
[noise], Hi, Hi, Mike inside of me.
It makes it gives you go from March 1000, or 23 on 2000, and Wednesday, and Matt Matt.
The AR increased our 4.5 billion pesos to 5.8 little test.
At this her per se.
Our same office cash.
We have seen us seeking times all the mouse depending on the radio city.
And I'm basically revenge remembered thought was it bouncers broke even on 25% over what they pay.
I I know so people are are buying it either on the really short there because I'm going up like tomorrow. He was idea that 40 losses are basically plenty to fly due in December or go in that the Holy week quarter stream, but.
Got it and the fact that could sneak one last one and just just on competition.
What are you seeing competitively, giving some of this some of the restructuring activity and if you could comment on Mexico City, specifically, how many routes are you serving out of Mexico city in how large could ultimately be thanks, thanks for taking the questions.
Oh, that's weighing them, so what we've seen them from from competition them.
All the players in Mexico has significantly reduced some debt capacity in the second quarter.
In the domestic markets the market capacity has gone down.
By at least 76.
Aircraft.
Which is at 25% of the market's fleet.
So there's been significant capacity reduction.
And Hmm and that he opens up some opportunities in Mexico city, because two of the.
Main competitors operate more than 80% of their capacity from the people.
Used to operate more than 80% of that capacity for Mexico City.
So precisely we are looking at Hum opportunities, we have announced five new routes from Mexico city or to some of the golf or destination in the Gulf of Mexico sold so that that's the first step in that process.
Thank you.
And our next question comes from the line on for Mike Linenberg with Deutsche Bank. Please go ahead. Your line is open Oh, great Hey, good morning, everybody I'm just to follow up on the Wayne's Mexico City question holder.
So as aeromexico and Interjet have cut back service there. It's obviously created opportunities for you, but now with respect to being a slot constrained airport are those time channels that you end up using for the new flights.
Can you ultimately keep those or do they have to be given back when when there was other carriers.
Decide to add back service can you just talk about the mechanism I know some airports have these use it or lose it rules and then some.
Has some carriers have been granted exemptions from using all of their slots given the severity of covert 19.
Some color on that would be great.
Hi, Michael These high school and Hey.
Airports also you have waiver on did you sometimes oh, we lose it will bring to some than me. Okay. Wherever she is were seeing so many aircraft, leaving the Mexican market. We believe that we are going out and how.
We increased our footprint into Mexico City Airport and they have already granted they all have there's lots of west it for the summer season, and we believe the where we're going to request for December and seasonally so that's what you're going to be rapid for life.
And.
Just to give you some color on the magnitude of increases in Mexico City and May.
It was 90% less operations in Mexico City ended June about 80%.
Less than the previous year, so that they're significantly capacity reductions. It makes it was here.
For the market as a whole not overnight.
We currently have.
Designated 19 aircraft.
To Mexico City operation.
And we are operating.
72 daily flights from Mexico City.
The older 19 aircraft, what would that have been a year ago.
It was.
Approximately.
The same number okay, because because we were operating more I mean, where we're going to posters off ramp up Michael.
That makes sense that if it's the same year over year with the market having contracted as much. It's obviously a relative to a much larger footprint. There then what you had in the past versus the competition.
So that's helpful.
Which leads me to actually one another question. The fact that you are now taking bookings through October of 2021, I mean, we are well beyond the 330 days and I I think that is unique I'm not sure if I never actually seen an airline book well beyond a year and I'm curious number one our all the systems.
Out there.
Which you could potentially book the ticket I guess, maybe it doesn't even matters since most I think you're mostly in house anyway.
So maybe anything that you can talk about [laughter] technology basis, and maybe it's completely irrelevant since that you're able to do it mostly in house I'm just curious about what the take rates are for people buying tickets in September and October 2021.
Again, I, just I've never seen it before any any color or commentary around that would be very interesting.
Well on the technology side, Michael I'm, we're operating with a fabric care reservation system, which is mostly direct sales we make available inventory to any third party so that connect to navisphere, but we're not in GDS. It. So it's it's very.
Vary.
From a technology perspective, there's there's no issue. Okay. Typically operated previously to the pandemic with 14 months of fat tail, right now or increase that period little bit and Ah well the take rates, obviously out through October 2021, I'm going to be very relatively low.
The very price sensitive customers that I've been to.
Hi tickets and that's part of that however, we are seeing for the first and second quarter of 2021 quite some electricity in the market and with.
Good good uptake and those like.
Okay. That's good and then just one last one here.
Just maybe a quick one here the surge in ancillary a year over year as it as as a percent I think it was up you know whatever 11 or 12 percentage points.
Presumably that that's not sustainable longer term, that's more of just the distortion or the fact that you're just.
No you're driving relatively low levels of passenger revenue, it's down so much in its having some impact on ancillary.
As a is that the way to think about it or are we really on a new trend line here. Thank you for taking my questions.
So I think there's a bit of both on a number one we have quite a lot of non air ancillary like for example, the co branded credit card, Okay, which is.
Less cyclical in a downturn.
So we are keeping up with denominator, but the denominator is is lower because we have fewer passengers in the second quarter.
So the as Super Pacs has increased.
Despite that we have worked on several initiatives that have increased and your revenues I'm such as our new combo products.
And at some of the new package product that we had put in place at just prior to that pandemic and we're seeing the run rate up those products come through so we are a on a long term trend line to increase assay revenue per passenger.
Okay, great. Okay. Thanks, everybody.
Thank you Michael.
[laughter].
Our next question comes from Elena Becker from Cowen. Please go ahead. Your line is open.
Hi, Thanks, very much operator, hi, everybody I just had some.
A couple of questions for clarifying.
Yes.
When you Holger when you talk about.
Leaving no stone unturned to attract passengers and so on.
Can you just talked about what that means for advertising spend and how you're thinking about that and how you're thinking about you know just counting to attract customers I I just wanted to get a sense of how you're thinking about revenue generation beyond you know selling tickets 15 minutes 15 months out there.
And the expenses associated with that.
So I was talking about.
Specifically the bus switching efforts that weve been undertaking.
We use them they sit down turn to reading sharpened our marketing message for the bus.
Most travelers I'm. So we've been out in the field data in front of bus stations with our typical you know a grassroots marketing where weve.
Focused on on that message in the domain Mexican T.D., so truck bus customers to fly on our airplane.
Really focusing on on the health and 70.
Aspect of traveling with the airplane and my favorite to trouble on the airplane right. Now then that's going on that on a bus.
We have invested a indefinitely spec for that specific target market in a more marketing expenses. However, marketing expenses for the period are down almost 50%.
So going forward, what does that mean that we are going to.
Stimulate.
Demand with low fares.
We specific targeted marketing efforts for the bus customers.
And to drive online sales. So you will see some efforts obasi, especially in social media and on the digital platforms to attract the price sensitive bus customers.
Okay.
And then my other question is is there any.
Detail you can give us in terms of capacity by region I feel like energy I mean, you have some international but Central America is close to maybe what's you don't have you heard when some of the central American cities countryside.
And again.
And maybe.
Help us out there.
So we took a upgrades versus steps approach to be covering our network. So we put in many route that we operate it previously focused mostly on the domestic market.
The case in point quantity for example is back to levels Oh 2019 in the same period.
At driven mostly by the via far traffic that I mentioned during the call.
Well the hot is also stronger than that some of the other regions.
The U.S., Mexico market is still relatively.
No regarding ramp up and Central America is closed altogether.
We believe that does tend to American operations will restart in second half of August.
That's when the countries will open up and we expect to restart operations during the September of this year.
Right.
And then if I could just question one more.
Question I Wonder if you can you give us any other details around the deferral times.
You know in terms of pay back or months of deferrals or things like that maybe you said it and I know that but that was my question.
[noise] basically only at home and he has a real pain I will say that 30% Delta Apparels I'm going to be paid during the second half of these year and the remaining going in 2021.
Thank you.
Okay. Thank you very much everybody have a nice on having nice day.
Thank you then they.
Our next question comes from Stephen Trent with Citi. Please go ahead.
Good morning, everybody and thanks very much for taking my question I just had.
Two quick ones.
First it I was wondering if you could shed some light.
On a your potential search for a news the Oh it was kind of if they need to be Ah Tony I go out the door.
Diversity life, just wanted to get your thoughts on that as a first question.
Do we earned the process of doing it but I can say that them it very hockey CEO without where arps was injuries year for.
Great very clear and appreciate that Enrique and just one quick one I mean, sorry, I'll follow up to the Mike Linenberg.
Just to make sure can you give me some idea a you know approximately what percentage of your ticket if any.
Our actually love Fundable, I mean, I know, that's something more coming with a premium fair, but just to understand.
[noise] so.
Cash refunds to customers in the second quarter were around 204 million pesos.
And that most of our customers are taking up the boucher option, which gives them a 125%.
Oh, the original purchase amount.
There's always a non cash.
Imbursement I can be used called future transportation direct reimbursement equal to 0.7% of our last 12 month sales. So Steven you can see that numbers relative no.
Very clear thank you hold the I'll leave it there and let someone else asked the question I appreciate that guidance and stay healthy.
Thank you get too.
Next question comes from Matthew <unk> with Barclays. Please go ahead.
Hi, Good morning, Thanks for taking my question. So I just wanted to come back to you know clarifying on a few questions were asked about load factors and then you talked a little bit about stimulating drought. So soon he looked at then managing the network going forward you know capacities coming up in the next.
You might on is the idea to manage to loads or is there idea to potentially stimulating demand and putting some a little bit more capacity out there to try to try to get more more passengers flying through low fares any thoughts you can think you can share on kind of how we should think about the next few months and.
How management is gonna be managing.
So within the model or are you.
The currently doing it.
Managing the company for marginal contribution because we still have excess capacity. So the first and foremost is to get that seat flying again, and making marginal contribution which will help to cover some of the fixed cost up yet.
So.
Yes, we are trying to get to high hook load factor.
Cash flow takes priority in this situation and we are putting back in capacity, where we think we can make marginal contribution again with the bad debt.
The bread versus depth approach to market recovery. So we're going to try to we are schedule. Some of the that the route that we have had albeit at lower frequencies that in 2019.
So that we have the footprint.
We are recovering the footprint as fast as possible.
Okay.
That's helpful. Thank you and then just a real quick one even talking about the BFR Marquette on being pretty robust and I'm from is there anyway and I don't think you disclose the percentage exposure, but is there any way to talk about qualitatively you know how to frame that the amount of passengers that are buying and be a follow or certain markets anyway. We can think about.
That because it is really strong point Oh the recovery.
Yes.
We have publicly disclosed in our corporate presentation about 45% of our customers are BFR customers.
About 30%, our price sensitive leisure customers or small and medium sized enterprises and the rest would be precisely that the business traffic, which is the small to medium size enterprise. So we have the majority of our.
Our roots of our market segments of our customer segments on the apart.
Which are there have been the most resilient and there's a couple.
I I would agree.
To put Holger is saying that I mean, obviously the company wants to get back to normal day and although in the beginning of the ramp up by where most important if were is driving merging no contribution.
We do have areas and I do want to for example, where we are really managing full load factors and something which is absolutely important to understand is a company will make any airports to through the lowest price you do the market. Okay. So we can reactivate in markets and make the market demand restart gosh.
<unk>.
Okay well. Thank you that's really helpful. That's all from me.
And our final question comes from <unk>.
So [noise].
Please go ahead.
Good morning, he killed or thanks for taking my question I was wondering if you could provide some broad perspective on on the how cross border track you gain versus domestic on the way I'd point you noted some how much you. Each one is driving the recovery and also a second question would be if you could provide another broad perspective on how youre.
Capacity reallocation on their domestic side, maybe more specifically and also some someone that already answered, but it's already being able to quantify share against maturities on the domestic side going forward due to aeromexico when you're just getting back capacity from all the way, Yes, I think you mentioned, 50% shanda domestic side enough as of now but.
Well just wondering what that's bigger could become thank you very much.
So the market recovery in the domestic market has been a much stronger than in the U.S. Trans border market to Mexico. For example in June 2020, domestic market recovery was up about 19% versus the U.S. markets. We probably was about 10 for.
Okay for the market as a whole and that is also reflected in our capacity allocation. We are allocating lot more capacity to.
The domestic specific quite well hotter than to the cats bought a market.
However in August we expect to resume service to almost all the destinations that we had in the U.S. prior to defend them.
But at the lower frequency that we used to have.
That was the first part of your question that could you. Please repeat the second part.
Yeah sure that the second part Wamsi, it's too if you could provide another bus perspective on how your seat.
After the allocation of though in the domestic side I mean.
It's already been able to quantify showed good opportunities on the domestic side to try I'm actually enter just getting back capacity on the way out Ben and again I think you mentioned, 50%, but I was just wondering what that's figure could become in terms of my could chime domestically.
So one thing is the market share that we achieved in June which was 50%, but we are much more focused on.
Building back our core business.
Which is looking at the BFR market. So the strong domestic BFR markets from the quantum in Guadalajara rebuilding somewhat the price sensitive user segments, those kind of cool Los Cabos put about yacht those have been up.
Second strongest in the recovery and then the price sensitive small and medium sized entrepreneurialism that are going out to two CLI right now and so we're much more focused on our core business rather than looking at.
Marketshare and as we.
Reinstate capacity are guiding principle is to make marginal contribution to cover some of the fixed cost as long as we have spare capacity available once we reinstate all the capacity we will rebuild our profitability as we go forward.
It's very much that's for sure.
He was that we have no further questions at this time.
I will now I turn to program back <unk> best I know for any closing remark.
[noise]. Thank you very much against where everybody for be years. Thank you very much one of the sport as we've gone from all over.
Business partners. Thank you very much to over ambassadors, but I want to knows this meeting, saying that the most important thing for the company's ramp up as fast as we got to go back to shareholders return. Okay. That's our purpose obviously our most.
Working burbles and we're focused on DAP and will be trying to get there as soon as possible and accelerating around both the words that thank you very much to everybody have a great day and sensible participating today.
He thought conclude today's conference you may disconnect. Your line at any time and have a wonderful day.
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