Q3 2021 Controladora Vuela Compania de Aviacion SAB de CV Earnings Call
Good morning, everyone. Thank you for standing by and welcome to Valero Its third quarter 2021 financial results Conference call. All lines are in a listen only mode. Following the company's presentation. We will open the call for your questions and answers instructions on how to ask a question will be provided at that time.
Please note that this event is being recorded.
This event is also being broadcast live via webcast and maybe accessed through these waters website.
Those following the presentation via the webcast may post their questions on the platform and they will be either answered by the management during this call or by the Polaris.
<unk> Investor Relations team after the conference is finished.
To send your questions via webcast platform you need to click on the question Mark of just below the video area in the upper left corner and type in your question.
At this point I would like to turn the call over to MS. Maria Elena Rodriguez, but lowest as Investor Relations Officer. Please.
Please go ahead Maria Elena.
Good morning, everyone and thank you for joining the call.
Today is our president and CEO.
Our airline executive Vice President wholesale Blanco Stein, our Chief Financial Officer High net books.
Discussing the company's third quarter 2021 muscles.
Afterwards, we will move onto your questions. Please note that this call is for investors and analysts Holy any questions from the media will be taken on an individual basis.
Before we begin please let me remind everyone that this call may include forward looking statements within the meaning of applicable securities laws.
Forward looking statement.
<unk> are subject to several factors that could cause the company's actual results to differ materially from expectations are we supposed to described in the company's filings with the U S Securities and Exchange Commission and the Commission National one cut aided by Louise.
Furthermore, Lars undertakes no obligation to publicly update or revise any.
Any forward looking statements.
Similar to the earnings press release, we are comparing our results to the third quarter of 2019, instead of the third quarter of 'twenty two.
We believe this will provide a better comparison to our financial and operating performance of the company.
It is now my pleasure.
Sure to turn the call over to <unk>, President and CEO, Mr and we could have done it.
Thank you very much Maria Elena and welcome everybody for joining us today.
To begin by expressing my appreciation to our familiar from Boston, where there continues airports passion and commitment.
Mitman borrowers ahead of the early industry's recovery.
Going into this quarter, we had budgeted ambitious key operational and financial performance metrics for the periods.
Despite the negative impact of the adult of Orient here, we are again.
Demonstrating not only the strength of the business model, but their resilience and experience of our solid loyal and effective management team, where <unk> results within the stated targets over performing the industry.
I'm very proud of is the world largest team and what we have accomplished together.
Salaries as a proven executive management team with an average of more than 20 years of experience in the global aviation industry.
We're all committed to maintaining our market leadership and first year result to shareholders over the long term just like I have been since.
We founded this company.
We're here to stay for the long run.
Together, we are prepared to take off many routes and reach an ambitious growth plan, keeping unit costs, LOE and delivering sustained profitability.
Now I.
The day to highlight the most important I'm complishments in the third quarter on slide number four.
First we again demonstrated our company's agility and ability to adapt to a changing environment by rapidly deploying capacity to appropriate markets and stimulating last minute.
I would like to call them.
Polaris continues to record one of the strongest recoveries among airlines worldwide during the varden waves of the pandemic.
The low cost carrier model continues to demonstrate resilience even more in downturns.
Third we provided.
The guidance on EBIT margin between 40% and 43% and despite the third wave here, we are today delivering consistency at 41% of EBITDAR margin for the third quarter.
Six percentage points higher than the third quarter of 2000.
We managed to post the third quarter with disciplined growth, while improving our balance sheet and we are also one of the few earnings in North America that did not revise guidance down for the third quarter.
Fourth bullet is uniquely distinguishes.
<unk> itself in the global aviation industry by its results for the third quarter, where there is capacity expansion was 21% in terms of ASM as compared to the third quarter of 2019 with a solid load factor of 85, 4%.
Well, Larry has achieved strong cash generation.
Wishes of $1 million per day closing, the third quarter with $624 million in cash and cash equivalents, which represents 33% of last 12 month revenues.
Well ours is trials and improved by 12% with Honda and 68.
Ratios compared to 2019 what.
Well, Larry this ancillary revenues ramped up to 42% of operating revenues.
Polaris is CASM ex fuel closed at 4.09 cents for the third quarter, one of the lowest unit costs in the global airline industry.
Finally.
A very important number where there is leverage measured by net debt to EBITDAR improved by $2 eight times the lowest in the company's history.
Fifth we remain focused on strengthening the foundation of our long term goal.
With profitability we.
We are the leaders in the Mexican domestic market and we continue to see opportunities with tremendous potential to grow in our core markets and to expand into our international network.
I'd now like to turn the call over to our airline Vice President.
Precedent Hoggard Blanken Stein to these costs, our operations and how we accomplished our solid positioning in the market.
<unk>. Please go ahead.
Thank you Enrique moving onto slide five you can see that <unk> was effective in navigating a difficult and uncertain.
Onset in the quarter.
The Delta variant emerged during the summer months.
In the later part of the third quarter and caused a reduction in confidence among travelers in our markets.
In the third quarter, our capacity recovery and growth led us to operate 21% more ASM in the same quarter of.
2019.
International capacity increased by 17%.
The U S market was mainly supported by the VFR segment, while north bound.
Vaccine related travel slowed down.
On the domestic front.
<unk> in Mexico remained solid, especially.
Within VFR and leisure destinations, where <unk> were 19% higher compared to the same quarter of 2019.
Capacity in Central America increased 9% compared to the third quarter of 2019.
Still behind the recovery compared to other regions.
Traveling.
<unk> for the period.
A new record for.
For the third quarter at 168 peso cents.
A 12% increase over the same period of 2019.
Mostly driven by an improvement in ancillary.
Travelling improved while maintaining high low.
Load factors rebuilding the network and solidifying our presence in our primary Mexican and U S O U S VFR markets.
For the fourth quarter of the year, we continue to forecast healthy fares and strong ancillary revenues.
That said as market capacity.
Increases beyond 2019 levels and demand recovers.
Perez might experience some pressure in the most competitive markets.
And salaries reached a new record of 805 pesos per passenger this represents growth of 49% versus the same.
Same quarter of 2019.
The percentage of ancillary revenues reached 42% 10 percentage points above 2019 levels.
The increase was largely due to continued growth of traditional products such as baggage seat selection.
And bundles like the flexibility Campbell.
We continue to be excited about dynamic pricing of ancillary products.
We will continue to pursue an aggressive growth strategy and deliver strong operational performance.
On page six we highlight our operating interest.
Infrastructure.
At the end of the third quarter, we had a fleet of 94 aircrafts with an average age of five six years compared to 80 aircraft at the end of the same period of 2019.
In addition, the company achieved high utilization with 891000.
Total <unk> per aircraft per day.
Which maintains a large that's one of the highest utilization airline of similar size and aircraft type in the world.
Okay.
During the third quarter, while ours flew more than 41000 segments to overseas.
Over 70 different stations in Mexico.
The United States, Costa Rica, Guatemala, and El Salvador.
This was done with an on time performance of 82%, despite non controllable factors like weather and air traffic control delays.
Okay.
Well.
Salvador was certified on August 23rd and started operations on September 15.
We also initiated operations to Colombia.
Following our expansion strategy to South America.
Going forward capacity increases will be focused on Mexico city and.
Domestic routes, while also solidifying our presence in the core markets of Quanta in Guadalajara.
We plan to launch slides to Honduras by the end of October and have started selling those at January.
On the sales side third quarter 'twenty, one performance can be summarized in two distinct halves.
As shown on page seven.
In the first half we saw strong daily sales performances.
And very high demand and load factors.
In the second half of the third quarter, the beginning of the low season.
Which this year was exacerbated by the third wave of Covid infections in both Mexico and.
In the U S.
Daily sales were down by 12% and load factors declined due to waning consumer confidence caused by the Delta Varian.
Despite this impact we started to see a recovery at the end of the third quarter and are now observing solid bookings.
Bookings into the fourth quarter very much in line with the end of the second wave earlier in the year.
Market recovery in.
In August 2021 was at 91% while capacity recovery reached 101% compared to the same period of 2000.
19.
<unk> August 2021 domestic market share was 42, 2% an increase of three one percentage points versus July of 2021.
International market share remained at the same level of 11 point.
5% compared to July 2021.
Looking forward, we are encouraged by the current booking curve and the fare levels.
Vaccination progress in our markets is on track, we continue to observe COVID-19 cases in Mexico and the region.
The answer.
Around the Covid different variants continue to pose a risk for demand in the remainder of 2021.
However, <unk> has demonstrated the flexibility to quickly react and ramp down.
Or shift capacity if required.
Looking forward as detailed on slide eight we are seeing interesting growth opportunities.
Along several avenues.
Our growth will not solely come from expansion into new markets, we continue to see growth opportunities domestically and the ability to further cement domestic market leadership.
Organic GDP growth popular.
Population growth and an emerging middle class with a young population will give us an opportunity to further drive bus to air conversion.
The total domestic air market is expected to increase at the same rates as pre COVID-19 growth in our estimates.
The long distance bus market has been shrinking since 2018.
Even prior to the pandemic.
Testament to the U LCC penetration in Mexico.
We believe more bus passengers can be switched in the next years.
To give you an order of magnitude we believe that approximate.
80 million Mexican citizens.
Willing and have the ability to choose air travel over boss, if given comparable prices.
In a recent third party surveys 16% of people surveyed are first time Flyers, while 47% of survey respondents.
<unk> Atlanta Representative survey claimed to have never flown before.
Covid related health concerns has further accelerated the switching from bus to air during the pandemic.
This trend was also confirmed with that third party survey.
The opportunity for demand growth from these statistics allow us to increase route frequencies.
Add new routes and connect the dots.
Simply looking at the domestic Mexican market.
Additionally, we see opportunities to continue the expansion.
In VFR routes, among the U S Mexican and Central American markets.
Ah Salvador and Guatemala.
Among the central American countries have the highest.
Heritage populations in the U S.
Demographically speaking the increase of Central Americans.
In the U S is reminiscent of the 19 eighties and 19 nineties migration of Mexicans to the U S.
We believe there are multiple expansion opportunities.
Given these population and demand trends.
We continue to look at adding routes in the south.
Oregon market as well.
Low cost carriers represent approximately 10% penetration between Mexico, and South America as well as between Central America and South America.
Also legacy competitors in Central and South America are having to adjust capacity.
Due to chapter 11 processes.
This provides a backdrop for lars to expand its unique business model into these markets, where we believe demand will be strong.
Looking ahead into the fourth quarter.
We continue to observe strong sales in the short term.
Further output.
<unk> bookings into early 2022 are still somewhat lower relatively speaking than in 2019.
However, we have seen a positive recovery lately as we emerge from the third Covid wave.
And helped by our promotions that we launched to Incent.
Antivirus demand in those periods.
As for capacity growth guidance for 2022.
For the full year, we are currently budgeting ASM growth in the mid 20% range versus 2021.
And this growth will be.
It's loaded.
Into the first quarter.
Given the weak comps of the first quarter of 2021.
Now I would like to turn the call over to our Chief Financial Officer, Jaime bows to discuss the financial performance for the quarter.
Thanks corridor now.
I would like to point out our strong performance throughout our financial metrics as shown on page nine.
Total operating revenues for the third quarter were $12 8 billion pesos or 35% increase compared to the third quarter of 2019.
Mostly driven by higher and seniors.
CASM ex fuel for the third quarter increased 2% compared to the same period of 2019.
Closing at 4.09 U S dollar sense, mainly due to a higher maintenance cost and with delivery expense.
Total CASM for the quarter was similar to the third quarter of <unk>.
2019.
Closing at 6.3 between U S dollar sense.
The company continued its disciplined commitment to maintaining one of the lowest unit cost in the global aviation industry.
Net income was $1 5 billion pesos and net margin was 11, 8%.
Earnings per share totaled 130.
30, pestles and earnings per atheist, whereas 64 U S dollars.
EBITDAR in the third quarter was $5 2 billion pesos.
Presenting an EBITA margin of 49% the highest margin for third quarter.
Quarter in the company's history.
Our margin was six percentage points higher from the 30.6% EBITDAR margin reported in the third quarter of 2019, mainly driven by higher operating revenues.
For the third quarter will always deliver cash generation of 1 million.
Dollar spread they.
Closing the quarter with $12 7 billion vessels or six call it around $24 million in cash and cash equivalents, representing 33% of trailing 12 months operating revenues.
For the fourth quarter, we are budgeting a wrong 120.
In dollars in aircraft and engine rent expenses and $2 million in sale and leaseback gain to be accounted as other operating income.
The net cash flow generated by operating activities was $4 2 billion pesos due to an increase in total operating revenues in.
Improved to your RASM during the third quarter.
Cash flow used in investing and financing activities were 379 million vessels and $1 9 billion peso respectively.
By the end of the third quarter, our accounts payable and accrued liabilities were equivalent to 60.
Final days of operating expenses back to pre pandemic levels during the third quarter. The company incorporated two new <unk> hundred 20, new your aircraft, which flipped.
As of September 32021 largest fleet was composed of 94 aircraft with a never a change of five six years old.
Polaris is fleet had an average of 188 seats per aircraft.
81% of its aircrafts are sharklet equipped them, 40% are new engine option models were.
Where we are from our expectations to win this year with 101 aircrafts in closing 2022 with 100.
A 13 aircraft.
<unk> has one of the strongest balance sheets, among the Latin America Guy yours.
At the end of the third quarter, the adjusted debt to EBITDA ratio was two eight times compared to four two times in the same period of 2019, posting the lowest level in the.
C stores.
Our guidance for the fourth quarter 2021 we are budgeting, 26% to 29% growth in terms of <unk>.
Compared to the same period of 2019.
EBITDA margin in the range of 31% to 34%.
Cash and cash equivalents <unk>.
<unk> as a percentage of last 12 months' revenues at approximately 30% maintaining a net debt to EBITDA ratio below three times.
Please note that this guidance assumes an average economic fuel cost of $2 45 to $2 70 U S dollars per gallon for the fourth.
Com partner.
Bert to an average of $25 per gallon during the third quarter and no pandemic related or other material disruptions.
Moving now to slide 10, where lattice is committed to delivering growth during the next years through our sustainable corporate business model.
While I discuss it it's 2030 target to reduce its carbon emissions by 35% compared to 2015.
256.6 C O two ramps for revenue passenger kilometers.
On October 13, 2021, the company issue 1.5.
Fourth one peso four months link to our sustainability performance rules one of the first of its kind for the industry in Latin America.
The resources will be used to finance the company's wrote.
Moreover, while our your sustainability linked bond framework receive a second opinion from sustainability.
<unk> been on Sydney, and ambitious sustainability performance targets with a very strong key performance indicators.
Now I will pass it back to Enrique for closing remarks.
Thank you very much Jaime.
You can see on page 11, we're excited to show our results as well as the opportunities.
Continue to see we believe that Valero is this outstanding performance demonstrates resilience with a stronger position than before the pandemic began.
While all airlines are focusing on recovery boiler.
<unk> is looking for additional avenues of growth and continued opportunities for.
This business model are far from being exhausted.
We have a resilient and who.
<unk> ultra low cost business model, a strong balance sheet with a healthy leverage a solid recovery with ample opportunities to increase our presence in our markets and most importantly, the commitment.
We built an experienced management team to maintain consistent and sequential levels of profitability.
Operator, I would like to thank you everybody for listening. Please open the line for questions.
Thank you.
The floor is now open for questions.
If you have a question. Please press star one on your Touchtone phone at this or any time if at any point. Your question is answered you may remove yourself from the queue by pressing star two.
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<unk> question that you pick up your handset to provide optimum sound quality.
Participants can also send questions via the webcast platform you need to click on the question Mark just below the video area in the upper left corner and type in your question. Please hold while we poll for questions.
Our first question comes from Stephen Trent with Citi Bank. Please go ahead.
Yeah.
Thank you very much everybody and I appreciate you taking the time for my questions.
I just wanted to you know.
Take your temperature on on on some.
Ask equivalent opportunities I mean.
You know you guys operationally are are really kind of you know.
It seemed like you're way ahead of anybody else in the region.
And when you think about.
You know M&A for example, Ah if.
If there's anything that ever crosses our radar screen, even in a small way.
Granted that you're indigo partner.
Inter parts in Chile are you know doing something with American Airlines.
So when any kind of partnership down the road or.
Even smallish M&A opportunity ever interest you or that's not something that you're really interested in.
Thank you Stephen for your question.
The answer is clearly no there is nothing in disguise.
Yes.
Okay very helpful. Enrique Thank you and gets one super quick follow up.
Any update on your side with respect to.
Way to go kind of getting.
Instead, it back to cat one by the by the FAA.
Well the to our knowledge the Mexican aviation authorities continue implementing corrective.
Corrective actions to recover the activity one and.
We know that deployment.
Mexico is progressing well we had a visit from the FAA at the beginning of dozens of these malls and we are having another visit at the beginning of the following months.
During the visit that we have here in the last couple of weeks the data verification on the linguist linguistic.
The latest survey of the D. G AC.
And D.
They also did some checks on the training and the organization.
Set up four trading days.
Dave.
Does it have been.
I'd say.
And.
I'm really looking forward to November five.
We expect more or less about seven topics to be closed by the most.
Most.
Okay Super helpful. Thank you I'll, let someone else ask a question.
Yes.
The next question.
<unk> excuse me. The next question is from Helane Becker with Cowen. Please go ahead.
Thanks, very much operator, hi, everybody and thank you very much for your time. This morning I appreciate it.
Just a question on that on the <unk>.
<unk> ability bonds, that's pretty yeah, I was kind of impressed with that.
Because to your point no one else has done it and as you think about this issue going forward and.
You know, what's what's your your thought about.
EV Tal just that makes sense in the Mexican market, yet you know there's so many.
That rate hybrid hydrogen powered electric powered aircraft, but it does it makes sense to us to look into that as an opportunity at some point.
Not currently Atlanta, we're really focusing on the transition to have a fully neo fleet.
I think that's what I'm gonna be improved.
And yes G. A planet care program that we have it's really ambitious and what we are doing well.
Well, we'll keep focusing on that the other off shelf in Mexico on the countries that we operate and being a U S. D C and they are not right now appealing to the company.
Gotcha that makes sense and and most of those right now anyway, our ground replacement.
Not really aircraft replacement. So it makes sense. Thank you for that and then just talking about.
I believe Helane I think that's something which is really important.
Like.
The view that you made the point I think the seal to submission.
And pulls from the company are really aggressive from very important if you compare those those goals with the rest of the industry. It's very ambitious goals and I think we are in the right direction and in the right.
The reaction to really take care of whole blood.
Oh, Yeah, I I don't disagree with you.
And obviously you have huge opportunity and then and then Hygge actually you said something about growth opportunities and I'm thinking about like what.
A lot of countries.
He is in like Northern South America have either not a lot of capacity not a lot of it air service or.
Are known have the road development right that and so people have to fly.
Are there markets that that you would think going into first.
Versus you know markets that make no sense and then if you think about deep South America would you have to look into another aircraft type.
Helane, So let me reiterate.
Some guidance for next year, we've said that we're going to be in the 25% range with a frontloaded for the first.
Carter.
Due to the lower cramps and as we look at regional and geographical expansion clearly Central America has is on our mind with our Aoc in Costa Rica, and our new <unk> and El Salvador were also very much focused on our core market, which is Mexico domestic and the U S. VFR.
First we have launched operations to Columbia in this quarter and as we look at.
Opportunities are in South America, clearly, we are limited by the range of our aircraft.
From Costa Rica, El Salvador, and Mexico, we are not thinking about a different aircraft type.
Okay. That's really helpful. Thanks, you guys.
Thank you Lynn.
The next question is from Mike Lindenberg with Deutsche Bank. Please go ahead.
Oh, Yeah, Hey.
Good morning, everybody.
Couple of questions here.
First off maybe to Jaime.
I know that you had a hedge position in place for some time I think it rolled off at the end of the June quarter and it does not look like that you have a fuel hedge in place going forward or can you just update us on where you are on hedging and maybe youre thinking about hedge.
Hedging I'm just given.
Everybody is now focused on the movement in fuel prices.
Michael We don't have anything hedged right now and we are not thinking about hedging.
Okay. So youre not thinking about hedging. So then Jaime is that did you just inherit those hedging that hedge book and I think maybe your philosophy is to.
You now have a fuel hedge or has there been a change in how you think about fuel hedging.
Basically where we're looking at the historic basket sort of what we do.
We do hedging on the call.
Or in price and then of course going forth and for US if we settle for journeys and I see someone will do it correctly.
Not an evaluation is done we are not going to proceed with hedging and we have a strong balance sheet and we have the advantage of our Nielsen our fleets, which consume less fleet and we have also sizing the market and the other ones are done at June.
So it is possible we may pass through.
So off into.
And just keeping in mind that we won't be maximizing the revenue for the park.
All right makes a load factor a fair.
Okay. No that's helpful and that makes sense hold are you you mentioned when you talked about the EBITDAR margin being a little bit lower in the fourth quarter you did talk about summit.
My personal capacity coming on.
And you talked about.
Anticipating that yields will be under pressure in what you referred to as your most competitive markets.
What are your most competitive markets are you referring to U S. Transborder is it the trunk routes like Mexico City to Guadalajara.
Derek can kuhn.
The triangle, what can you give us just a sensor a flavor on what right now are the most competitive markets in Mexico or internationally.
So clearly.
The trunk routes the capacity on those routes is the most competed we have three carrier.
Carriers in Mexico domestic operating on those on most of those trunk routes.
Got it.
All of the players have added capacity into Mexico City International Airport. So we're clearly seeing some ramp up pricing pressure in those markets.
However, we have a solid portfolio of routes that face are only competitions.
100 buses where.
Where we don't see.
Any pricing pressure right now going into the fourth quarter were 41% of our network.
Only compete against the buses, especially in our core markets of Guadalajara and Tijuana.
That's great.
Great color and then my last.
From this is probably for you and or Enrique.
You know come November 8th you know the U S. Obviously is changing the border restrictions for for many countries. It's a relaxation.
But for Mexico, which for the most part has been very open.
Between the U S and Mexico.
And not the land border I'm talking about the air border.
Basically it was nothing more than a 72 hour within departure of rapid antigen tests showing negative Covid result.
And now we're going to have an additional level of layer, where a vaccine is going to be required to come to the U S. So.
When the news came out one did people actually appreciate the distinction and and two what is it due to your bookings and our people aware of the fact that in order to come to the U S. They're gonna have to be vaccinated is that going to impact some of your originating VFR travel.
It sounds like from what you've told us about bookings and trends.
Things seem actually quite strong so I'm, just curious what you're seeing and what's.
On that front. Thank you.
Yeah, Michael we've been observing our booking curves to the U S and from the U S. Very closely currently we believe that we will not have any impact.
On our U S bookings given this change.
Vaccination rates in Mexico, and the U S are quite high already so we currently don't foresee any impact.
Of this new requirement for bookings in the winter season.
Okay and it could could one say hold or is that maybe your that you have found through surveys and passenger behavior.
That maybe there is a high correlation between someone in Mexico, who holds the passport that theres a high correlation between the passport holder and someone who is also one who's going to get vaccinated.
That there is a high quality, we don't have we don't have any specific studies on that but that is a fair assumption Michael absolutely.
Okay, alright, great, Thanks, and great quarter, guys Fantastic now Michael Thank you Michael Thank you Mr. Lindner.
The next question is from Pablo <unk> with Barclays. Please go ahead.
Hi, everybody. Thanks for taking my question.
I hope so.
On my side. The first one is if you can provide a little bit more color on the EBITDA guidance for the fourth quarter I know you were expecting.
Higher jet fuel.
He's not the only reason why.
We might see.
Construction in margin in the fourth quarter relative to the third quarter.
My second question is what are your overall thoughts on the Santa Lucia Airport right now because perhaps in six or eight months that.
Airport will be ready and the government is really willing to have airline.
Airlines operating there so we're gonna see Viva La is operating in both airports.
What's your strategy right now thank you.
Thank you for your question on your first question the answer is yes.
Second question on our system and the second question Pablo the position of the company is.
We are in the process of doing market studies around.
And to the center this year from the market itself.
We think that so the lucia itself.
Yes.
Market, which is around the airport from symptoms here.
Is pretty much the size of the market with market similar.
And then I'll ask Elliot this or for example character.
Yeah.
So we see some <unk>.
Sales in.
In the population, which is around the airport and probability of doing business with us.
Population.
Nation.
Having said that it's a lower income population so.
Again.
We need to adapt our pricing or something like that.
Our position with the government has been that provided that safety is guaranteed.
The cost of the airport is a viable cost we can.
Perfectly do business in that airport if possible.
Okay.
And one follow up on that do you think that the government right now is willing to provide some incentives for you to operate.
Or they are not in that.
And Mike.
I cannot speculate on that.
Okay.
Okay.
And you were saying on my first question.
The contraction in the EBITDA guidance at 100% related to jet fuel right.
Correct.
Patricia.
Thank you.
Okay.
The next question is from Duane <unk> with Evercore ISI. Please go ahead.
Hey, guys good morning.
Good morning.
I just I just wanted to follow up on a couple of points.
Hungary, you mentioned.
You might experience some pressure.
I just wanted to clarify is that something you are seeing in the booking curve today or is that just hey, maybe something will happen at some point in the future.
Well, what we are observing that the market is slowly coming back to them.
Demand supply equilibrium.
With capacity being added into the main markets in Mexico, especially Mexico City Airport.
And as that market comes back into equilibrium, we're going to see a normalization of fares.
Travelling levels.
Closer to a normal year and Thats.
We arent, saying.
With what we've been mentioning about the topline.
We are well positioned to deal with lower.
At lower fares in the market as well.
To remind everybody we have a lot of routes that have only.
Only bus competition with very little.
That's what competition and our business model is all about driving low fares in the market at stimulating demand and offsetting those knauf has through ancillary.
That's very important.
To point out our <unk>.
LTC business model makes money at traveling levels, where our competitors do not.
So we're very comfortable with a normalization of traveling levels in the market.
Right.
Sorry, sorry to be a little stubborn. So I think that's I think that's all very prudent and and sober commentary I just want to separate.
Going to see something you're going to see versus something.
Make more seeing is this something you are seeing now.
No.
No okay sorry.
Second point.
On the vaccine just to follow up to Mike's question on the on the sort of vaccine announcement to the U S.
Based on the data that we look at it looks like.
You will king's activity has actually accelerated and so again I appreciate your very sober and prudent and an appropriate commentary, but can you comment on the bookings response since that announcement has it actually accelerated.
Yes, Duane we are seeing.
Healthy booking curve going into the winter season in all of our markets.
In the U S in the domestic and in Central America and during the fourth quarter, we expect PRASM.
<unk> levels to be sustained or slightly ahead of the fourth quarter of 2019, which were using as comparison.
And.
Quite what we're currently seeing so healthy booking curves we should have a good winter season with traveling levels ahead of 2019 levels.
Okay I appreciate the commentary thank you very much.
Wayne.
Again, if you have a question. Please press Star then one.
The next.
Next question is from Veronica Ramiro with Citibank. Please go ahead.
It appears periodical has dropped off the line again, if you have a question. Please press Star then one please standby as we poll for questions.
This concludes today's question and answer session I would like to invite Mr. Belt Haneda to proceed with his closing remarks. Please go ahead Sir.
Well. Thank you very much again to everybody I really want to express my sincere gratitude to our analysts with most specialty to our family of ambassadors.
The board of directors.
The investors our bunkers in the stores.
Our suppliers, especially Airbus on Pratt and Whitney with whom we worked really hard during this quarter.
With the commitment and support that has gotten us to this exciting position with such a unique opportunity.
Do you need to know where markets and a fabulous growing process going forward.
We have demonstrated yet again that the <unk> business model is sound and can deliver superior results.
Our team has taken the opportunities that presented themselves from the crisis and we have come out stronger.
And in a better position to succeed in the market. We're now one of the most profitable earnings in the world with more room to grow geographically and in terms of revenue per passenger.
Finally, our Investor Relations team is available to speak with you as needed. Thank you very much for your great.
Great support and we're looking forward for the fourth quarter with great results to date.
This concludes the Valero conference call for today. Thank you very much for your participation and have a nice day you may now disconnect.
Okay.
[music].