Q1 2022 Controladora Vuela Compania de Aviacion SAB de CV Earnings Call
[music].
Good morning, everyone. Thank you for standing by and welcome to our first quarter 2022 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.
Please note that we are recording this event.
This event is also being broadcast live via webcast and maybe accessed through <unk> website.
Those following the presentation via the webcast may post their questions on the platform and they will be either answered by management during this call or by the last Investor Relations. After the conference is finished to send your questions via the webcast platform you need to click on the question marks just below the video air.
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At this point I would like to turn the call over to Bernardo.
The largest senior corporate finance and Investor Relations Director. Please go ahead Renata.
Good morning, everyone and thank you for joining the call with US is our president and CEO and Rick have been planned into our airline executive Vice President Lincoln Stein, and our Chief Financial Officer Jaime pools.
They will be discussing the company's first quarter 2022 results afterward, we'll move on to your questions. Please note that the scores for investors and analysts only.
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 statements are subject to several factors that could cause the company's actual results to differ materially from expectations. As described in the Companys filings with the United States does he see in Mexico see MTB. These.
These statements speak only as of the date of the that they are made.
<unk> undertakes no obligation to update or revise any forward looking statement.
As in our earnings press release, all our numbers are in U S dollars and compared to the first quarter of 2021, unless otherwise noted. It is now my pleasure to turn the call over to <unk>, President and CEO Enrique <unk>.
Yeah.
Thank you very much and Napa and thank you everyone for joining US today, we're happy to report continued strong traffic and revenue results in the first quarter.
In Mexico's domestic market, we continue to see a strong recovery of demand that started a year ago.
In other markets such as the domestic U S. Cargoes have recently begun to experience a similar recovery.
On slide three highlights.
The key reasons behind our strong performance and success haven't changed.
First we'll always has demonstrated an ability to adapt to changing demand weekly and has also been able to gradually pass through the impact of the recent rising fuel prices second when I got plenty of market to hoard Dooney <unk>, both at home and abroad rollout is just trends in the fare environment continues with our VFR customers.
Who value our schedule reliability and our leisure customers attracted to our many point to point leisure destination.
Third our growth plans remain flexible and current demand strengths confirms that we can feel in the mid twenty's ASM growth guidance for the year without sacrificing profitability.
Fourth our ultra low cost and strong balance sheet allow us to absorb volatility better than our competitors have positioned <unk> well for the future.
Regarding our first quarter performance, we generated total revenue of $567 million in the period, an increase of eight deeper said versus 2021 and six 3% versus 2019.
We generated positive cash flow from operating activities of <unk> hundred $96 million.
EBITDAR increased by 52% to $97 million.
Okay.
Lee I would like to focus on two main topics.
Our ability to pass through the increasing fuel costs and the rationale behind boulardii sees growth stripes.
Let me start with the pass through the fuel cost.
Well that is his ability to pass through incremental fuel costs begins with the fact that we continue to have the lowest unit cost of any operator publicly trading in the Americas.
We entered the first quarter with excellent entry level base fares and ancillary fees from the fourth quarter, which helped the company's performance.
This strong demand was sustained in both quarters with an 87% load factor in the fourth quarter and 84% in the first quarter.
Two the omicron wave, we demonstrated the superior reliability of our operations once again.
During the first quarter of 2022.
Only crop negatively impacted demand in late January and early February .
At that point, we pushed more for volume and at the same time selectively increased base fares and ancillary Bryce.
Once COVID-19 cases decreased we gradually pushed fares off without sacrificing board.
The incremental cost of fuel price and volume during the first quarter was colder than $49 million or a 157% increase versus the first quarter of last year.
Polaris was able to pass through to revenues, 95% of the effect during the quarter sustaining a healthy 84% low factor for the period and closing the quarter with a T rise level of 7.0 dollars sets.
Due to the fare increases implemented throughout our adventure in the first quarter. The we built a good foundation through full where bookings to gradually absorbed the fuel cost pressure in the upcoming quarters.
So far in the second quarter, we have seen the strong load factor sustain and our forward bookings remained strong demonstrating that our core VFR and leisure passengers are eager to travel on our current growth plan is consistent with this demand.
So now is speaking about growth we have identified the recurring investment Corsair regarding boulardii sees growth stripes.
Capacity growth in mature markets typically matches GDP growth.
This is not true for varieties core markets.
Who lives operates in an emerging market with low air travel penetration.
Over the last 10 years the company say your Sims compound annual growth rate was 13% versus Mexico's average GDP growth of just 1%.
We have managed to grow while generating value for our general shareholders and building a market leading franchise that we believe is extremely difficult to be replicated by existing players or new in.
And here's why we believe we can sustain the growth trend with profitability.
First Mexico territorial size and population the distance between Tijuana and Cancun is roughly the same as New York to Los Angeles or Burris to Jerusalem.
In Polaris is linked to a low fares are designed to stimulate demand in in Underpenetrated aviation markets such as Mexico.
Much of the financial and revenue strength is concentrated in our three local core markets of Tijuana, Guadalajara and Cancun.
Our knitwear strength is primarily explained by our historical growth in Tijuana Guadalajara.
These two markets have been top performers for us and we plan to continue to grow there primarily by adding frequencies to existing destinations.
And this is not surprising considering the GDP growth in these northern Mexican region resembles in emerging growth markets.
We also plan to continue to grow in our southern Mexican market of Cancun.
Although GDP growth.
Haas being weaker in that southeast region.
Tourism from outside the region continues to support and grow these unique destination.
He says he made it also that their own 38 million Mexicans have migrated to the U S. In the last decades.
Last year, they sent their core nationals, a comb around $52 billion in remittances equivalent to 4% of Mexico's GDP.
The remittance effect into an emerging market does not exist in a developed or mature the courtroom.
Our webpage has become a remittance system to transfer money from the U S to Mexico for the relatives to fly and the same effect. We are seeing now in Central America.
Speaking about central American countries.
This three similar patterns and we believe we can successfully replicate in that region. What we have done from Mexico to the U S. In the last 16 years.
Yeah.
The second fact, our Mexico's population characteristics. It is well known that one of the largest target market. This VFR mirrored glass.
The company was conceived and perfectly fitted with its model to tackle these specific mark the usually travel with their relatives and are used to transporting themselves by boss from point to point, which creates a higher cost pressure for themselves.
And the essential component of our domestic growth strategy remains boss routes and the switching from Boston where travel.
We compete exclusively with bosses in 46% of Polaris as network with no Eric competition.
Having one of the lowest unit cost structures well, what we have successfully tackled the bus market and produced a lower edge based failure of $46 per segment, which is even lower in the domestic market.
We have a more appealing value proposition than boss's on trips larger than six hours. This is unique to Mexico, and we'll always have no conflict of interest that prevents us from grabbing market share from bosses are.
Our target segment for our domestic growth is to appeal, the 90 million Mexicans, who we have targeted to use bosses to travel there.
This is equivalent to the total population of Germany.
These emerging middle class segment in Mexico is the fastest income growing segment in our core markets.
<unk> grew 7% from 2010 to 2020 according to initially with.
We tailor our broke by offering low base fares and promoting and salaries designed to the needs of the spices.
As a result 43, 3% of our total revenues come from and seniors, giving us a powerful formula to tackle the world's market profitability.
The third factor or the air travel dynamics.
As proof of our success trips per capita in Mexico doubled two point feet five from our founding in 2006 to 2019 and this indicator is now back to an upturn.
Golar is accounted for 56% of the domestic aviation growth in that period, primarily with first time Flyers coming from the bosses and virtually doubling the size of the domestic market in terms of passengers.
Bose, we aspired to be at Columbia's Chillers Turks or molasses air trips per capita in that piece the Mexican domestic market could be 1.3 to three six times bigger than today.
We have identified over 325 potential new routes to grow that fit ideally with our low cost low for our business model.
However.
We will do it this year by adding frequencies to our existing Nick.
We remain flexible and disciplined and we begin to see any sign of weakness, we will quickly reign in that growth.
We're also growing international lead in the U S Board, the VFR market with 30% of forward capacity.
Towards the end of the year, we expect the word transborder performance to be enhanced by 40, optimizing our gaucher partnership with Ford Europe .
This is currently restrained by Mexico's FAA category, which we hope will be upgraded by the end of the third quarter.
Finally, we are looking ahead to the future and positioning ourselves with international grow habits send.
Central and South America, where we are growing from our separate air operator certificate and a.
Saba and Costa Rica, with similarity seem population characteristics and transportation dynamics.
We believe that Golar is this consistent performance demonstrates our resilience and adaptability.
It is essential to highlight that we are in a stronger financial position than before the pandemic with higher cash levels and lower financial depth well.
While all their earnings are now focusing on recovery and repaying the debt taken during the pandemic, while ours is focused on executing its growth strategy.
Our ambassadors remain a vital part of the strategy and I want to thank them for staying focused on providing a safe reliable and consistent travel experience for our guests. The airports have been an essential part of our strong performance.
I would now like to turn the call over to our airline executive Vice President Holger blank each time to discuss our operations and provide more details on our performance.
Thank you Enrique moving onto the next slide I would like to provide some more color on our quarterly financial results.
On the revenue side, we ended the quarter at a higher fare levels, having increased fares gradually since December in response to rising fuel prices.
Demand remained strong throughout the quarter.
Despite omicron effect in late January and February the strengthened demand enabled us to push through careful pair increases during the quarter. This was the reason behind our strong <unk> performance, which beat expectations.
As far as monthly demand trends throughout the quarter, we reported a healthy January traffic performance with a slight dip in forward bookings offset by healthy demand in close in bookings.
In February we observed a consistent decline in Covid cases, with a corresponding rise in bookings.
We can conclude that omicron had a three week week impact on sales with a minor effect on the quarter.
Especially since this is a seasonally low time of travel for us.
Every new wave of Covid had less and less impact on our revenues.
Yeah.
Our average fair for the quarter was $46 versus $37 a year ago still low in absolute terms are.
Our fare increases were implemented selectively added small amounts ranging.
Ranging from one to $3 per passenger.
We are also benefiting from the growth in our international markets.
Which are also driving up overall fare levels.
On the capacity side.
<unk> for the March quarter increased 1% from the December 2021 quarter or 50% versus the first quarter of 2021.
Our load factor of 83.5% remained at healthy levels.
Increasing five four percentage points year over year.
Our first quarter domestic network.
Representing 70% of our ASM Ruby.
<unk> grew by 41% year over year.
Like last quarter. Most of this growth was out of Mexico city on existing routes.
With both VFR and leisure markets remaining strong.
International capacity grew by 77% year over year.
Most of this growth was in the Mexico to U S market, where.
Where we also saw healthy demand.
We also grew in Central America, where we are coming off a low base in the first quarter of 2021.
We currently have four aircraft in this market.
We attribute our success this quarter to our unique position of taking advantage of the bus switching momentum and being able to fill in the capacity abandoned by weaker competitors.
Which we now think is complete.
We also believe there is pent up demand for traveling now.
That the Covid strain appears to be weakening.
Overall traveling for the first quarter increased by 18% versus 2021 to seven cents.
Load factor remained strong at 83, 5% with both leisure and VFR markets showing a continued strengthening in the quarter.
As a reminder, Polaris has very little business traffic.
Ancillary revenues continue to be a large part of our overall revenue mix.
These consist mainly of baggage seat selection and bundles like the flexibility combo.
We also further drove growth in ancillary revenues this year by adding members to our discount program and expanding the number of co branded credit card members.
43% of our overall revenues were from ancillary for the quarter.
And we reported $35 per passenger.
Finally, total operating revenues per passenger increased 8% to $81.
For 2022, our international growth will help continue to drive ancillary revenues, especially in the back half of this year.
We remain focused on growing these revenues through a more personalized experience on our website.
We had a fleet of 104 aircrafts with an average age of five six years at the end of the first quarter.
For the same period last year.
Hours had 87 aircraft a 20% growth.
However, EBITDA per aircraft is now higher.
We maintained high aircraft utilization during the quarter with $13 three hours per day for a productive fleet.
As a reminder, <unk> has one of the highest utilizations globally when measured against other airline with similar aircraft types and airline models.
And again, even though ASM growth was strong at 50%.
We managed to stimulate demand and maintain a healthy load factor.
During the first quarter, while ours flew close to 500 departures per day, an increase of 55% compared to 2021.
Serving over 71 different destinations in Mexico, United States, Costa Rica, Guatemala, El Salvador, Honduras and Columbia.
Building upon our launch into Columbia last October we recently opened for sale three routes to Lima, Peru.
From Mexico City, Cancun, and San Jose Costa Rica.
For the start of flight service in June 2022.
Looking ahead to the second quarter the shift of Easter to mid April has had a positive impact on travel.
Our domestic bookings appear strong with both VFR and leisure markets solid a primary focus for growth remains to increase frequencies to existing destinations.
On the international side, 90% of our capacities from Mexico to the U S.
While our capacity girl remains constrained due to Mexico kept two we benefit from high relative market shares in traditional VFR routes.
Visiting friends and relatives account for most of our Mexico to U S passengers.
And our north bound leisure traffic also remains healthy.
Central America is still relatively small representing 3% of our capacity. We currently have four aircraft in the region.
We saw 123% year on year growth, driven by VFR and leisure traffic in the quarter.
Overall Central America continues to lag the recovery in the domestic Mexican market by three to six months.
We are establishing our presence in the in this region and we see a significant market opportunity over time.
There is currently no other central American based low cost carrier in this region an area that is an emerging market with approximately 50 million inhabitants.
We think we have a substantial opportunity to grow to more than 20 aircraft over the next five years.
We characterized the central American market as in its infancy with much promise.
As it grows up to scale we.
We expect to start flying directly with the Salvadorian operating certificate to the U S. In the second quarter.
We see plenty of runway for growth.
Our growth will be concentrated in the domestic market for the first half of the year, primarily adding new frequency.
Towards the end of the year, we expect more growth in the U S with cat, one recovered and Central America as that region also recovers.
Our plan is flexibility and we will adjust depending on market conditions.
Our three main avenues of network growth remain the domestic Mexican market the transporter market into the U S and Central America.
We lost three airline operating certificates provide us with many strategic and flexible options.
We are currently budgeting ASM growth in the mid 20% range versus the entire year of 2021.
And this percentage growth will be frontloaded into the first half given the weak comps of the first quarter of last year.
Consolidated <unk> for the second quarter of 2022 is expected to increase around 5% compared to the first quarter of 2022.
Implying about 20% ASM growth versus the second quarter of 2021.
We believe that this additional capacity will be operated with our traditionally high load factors.
For the second half of 2022, our capacity growth will be in the mid teens.
Over the next five years, the main pillars of Polaris investment thesis that we.
We will continue to benefit from organic GDP growth pop.
Population growth.
Large and growing middle class in Mexico, and the continued switch from long haul boss to air travel and exciting story that we continue to capitalize upon.
Okay.
Now I will turn the call over to our Chief Financial Officer Hydro both to discuss the financial performance for the quarter.
Thanks Carter.
Now I will like to list cost software first quarter 2020 financial results.
<unk> and our strong financial performance.
Total operating revenues for the first quarter were $567 million, an 80% increase compared to 2021 details like holder.
Got some material for the first quarter decreased 8% compared to the same period of 2021 closing up $4.04.
The company maintain its discipline neutral low cost structure, despite inflationary pressures, Mexico, the U S and Central America, and higher redeliver accruals associated with the renewal of our fleet.
We have mitigated these pressures by focusing on controllable costs and higher aircraft utilization.
Total CASM close of $7.04 for the first quarter, a 13% increase compared to the first quarter of 2021, driven by higher fuel costs.
The average economic fuel cost increased 64% to $315 per gallon in the first part.
Confirming the financial benefit of the renewal of our fleet.
Polaris is fuel efficiency measure in ASM per gallon improved by six 1% from the first quarter of 2019 to the first quarter of 2020.
Resulting in fuel savings of $4 7 million gallons or $14 $7 million.
Is this an effective hedge against rising fuel prices and means that the largest first need to move up less than our competitors in this environment.
Equally important.
Fishing fuel efficiency from the renewal of our fleet and the highest density seating in our aircraft are critical elements of our 2030 goal of reducing C O two emissions or IP, Kate by 35% compared with 2015.
For the rest of 2022, the company expects to continue seeing volatility in fuel prices and additional inflationary pressures.
For life as management, we closely follow macroeconomic press to react swiftly and we will continue to pursue further cost efficiency to maintain a healthy cost structure.
As discussed in our last conference call certain amendments to the Mexican tax loss in 2022.
Changes to value added tax.
After a careful review of the reform and mitigation naturals implemented by the company, we have quantified the animal impact and an approximate amount of $30 million.
Which is an increase of points your weight dollar sensing castle.
In addition, we have judicially challenge the amendments constitutionality b a legal proceedings.
<unk> reported a net loss of $49 million in the first quarter.
The company reported a loss per share of four cents loss per avs or 42 cents.
EBITDA increased 52% to $97 million.
And the EBITDA margin contracted by three two percentage points to 17%.
Net cash flow generated by operating activities in the fourth quarter was $196 million the cash flow used in investing and financing activities was $6 million and $183 million respectively.
We believe that the company's best use of cash is to continue to invest in our fleet and network for the future.
Part of it or more.
<unk> delivered cash generation of $9 million for the first quarter closing with seven Colorado 50 millions in cash and cash equivalents, representing 31% over the last 12 months operating revenues.
<unk> is one of the most robust balance sheets, among the Latin American carriers on our global peers.
At the end of the first quarter.
Our net debt to EBITDA ratio was two three times.
Bert to 11, two times in the same period of 2021.
Two five times in the fourth quarter of 2021.
Record level in the company's history.
In the past few months the company has obtained financing at attractive conditions or the pre delivery payments for 18 aircraft to be delivered in 2023 and 24 in an aggregate amount of $262 million.
We incorporate this three new <unk> hundred 20 Neo aircraft in our fleet during the first quarter as well.
March 31, 2021 or largest fleet was composed of 104 aircraft with an average age of five six years old obviously sleep gathered an average of 188 seats per aircraft, 83% of its aircraft are sharklet equipped and 46%.
And an option or near models.
We expect to win 2022 with approximately 115 aircraft, depending on Airbus delivery schedule compliance increasing meals to 54% of our fleet.
Assuming no significant disruption related to COVID-19.
We'll have dorian macroeconomic and geopolitical events will impact <unk> business and budget in an exchange rate of 25 to 28 vessels golar and in economic fuel price of $3 123, $4 per gallon, we update our full year 2020.
Two guidance as follows.
Right the rate of mid <unk> growth in terms of <unk> compared to 2021.
Increased revenue by $200 million from our previous guide us to to date to $3 billion.
Introduce an EBITA margin guidance in the high <unk>.
We expect our full year CASM ex fuel to increase between 1% and 3% compared to 2021.
Finally, we expect capex to be between $140 million to $145 million.
And for the second quarter, we are guiding and needed term margin or low to mid twenties.
We are budgeting an exchange rate of 21 to 22 vessels per dollar and in economic fuel price of $3 seven to $3 per gallon for the work.
We believe more laddish is one of the best Ronald for low cost carriers globally with a healthy balance sheet.
This allows us to continue executing our disciplined growth strategy with the flexibility to talk sort of macroeconomic volatility brought by geopolitical events now.
I will turn the call over to Enrique for closing remarks.
Thank you very much Jaime finally, we have a resilient and effective ultra low cost business model, a strong balance sheet, a healthy leverage a solid recovery with ample opportunities to increase our presence in our markets and most importantly, the commitment of an experienced management team.
To help navigate our early towards maintaining consistent and sequential levels of profitability.
In a volatile market distinguishing between sign and I noise is crucial.
Over the past six quarter, we're always had accumulative EBITDAR margin of 33% and we believe we can deliver as similar cumulative EBITDAR margin in the next six quarters.
These statements shows the confidence we have in Golar is business model and our ability to remain one of the most profitable airlines in the world.
Thank you very much we're listening operator, please open the line for questions.
Thank you.
Let's now open for questions.
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Our first question comes from Duane anyway with Evercore ISI. Please go ahead.
Hi, Thank you good morning.
First just maybe an easy one I noticed you put.
Fuel price now in your in your monthly traffic, which I think might be helpful for some.
You know, we we hear from investors just a little bit of frustration that some of the analysts on the street are not sort of timely updating things based on where fuel prices are which of course.
We could we can see every day.
But now you've put it in your and your traffic as well so I wonder if.
If you would just comment on where you think fuel prices will settle out here.
Into Q.
Or if you have sort of a spot fuel price just to help you know everybody. That's on the line here.
Pardon the interruption. It appears we have lost connection to our main speaker location. Please standby, while we reconnect.
[music].
Yeah.
[music].
Pardon me, ladies and gentlemen, we have reconnected our speakers line Duane.
Anyway with Evercore ISI. Please ask your question.
Oh sure we'll try again.
And good morning.
Just wanted to ask you if you had a.
A good estimate for <unk> fuel.
Where or spot fuel number that you're realizing.
Today, and I wanted to commend you for putting fuel in the monthly traffic.
Central Maine, basically the guidance that we provided in the economic fuel price between three seven and 3.8, but we use with the spot W. G. I have left for work.
Whilst our $108 28.
Crack the Whatsapp $34 75, and the globe are yet at 341 is.
The recovery is what we use and knocking complicate it.
We will continue to publish together with a drop in report as we did in March.
The average economic fuel price is up we have doing the math.
Okay, you feel I know I know you put that in there for the year, but you feel like that's the right number for QQ like what would your spot fuel price be right now.
The spot price right now it is.
The numbers over and not the rule.
We have the jetblue.
At 409.
Okay.
But.
Well the numbers that I provided to you are the numbers for the cure for that complete our second Q.
Okay. Okay, perfect and then and then just a broader question for my follow up maybe maybe for Enrique is we just step back and think about how the world has changed.
In the last few years, you know supply chain disruption sourcing from Asia, a global energy supply disruptions. It just feels like there are a lot of ingredients.
For a closer relationship between the United States and Mexico. There is clearly potential of course, there's potential can be delayed with political cycles in the U S and and and in Mexico, but how how do you think about this potential for a closer relationship.
And and what should U S investors be watching for what signs should we would be looking for that this relationship relationship is improving or or maybe getting more distant.
Well.
Duane.
Some some some base I'd say things are going really well some data I think.
That things are not going in the right direction.
I think in general during the last months.
The relationships have been really tense because of the energy reform.
<unk>, which is already so I would say as part of the elite of the issuance.
The possibility of changing the constitutional degree.
In relation with the energy reform.
Voting that happened two weeks ago Congress and sea salt.
I would say that yes on one side because of the new world.
Order, we need better relationships.
Improved relationships more and more.
But.
It's up and down every day.
Yeah.
I appreciate that perspective.
Yeah.
Yes.
Having said no question passports.
We've said that exports of the whole economic out.
Between the two corn prices is moving ahead at read as well.
So go ahead to the next question please.
Thank you. Our next question comes from Helane Becker with Cowen. Please go ahead.
Thanks, very much operator, hi, everybody and thank you for the time. This morning. So I just have two questions. The first question is on.
Yeah, just to clarify point of clarification second half capacity growth up in the mid teens is that that system right. That's that's all.
Operating divisions, El Salvador, Costa Rica, just everything not just Mexico.
Have correctly.
Okay. Thank you and then my other question is with respect to <unk>.
Dash bus shifting.
As as you get further and further into you know for people knowing for Lora is there has there ever.
Then a time, where somebody has said this.
They've taken off the plane and then they said no. We're just never going to do that again.
Well Helane, our our data shows that once we have our people switched from buses to air transportation on the longer routes.
Bus trips beyond six hours.
People are very reluctant to go back to the buses are more than 90% of our customers remain.
Loyal customers to us.
And we've built our network around that market to remind everybody. We have 46% of our roots that only compete against the buses. So we continue to believe that there is a potential to switch more people from the buses to air transportation in the next few years.
Great. That's very helpful. And then the only other thing I have is any word on when cat one will be restored.
Yes totally.
But we what we saw in Mexico.
And you all with the two three weeks ago.
The 28 points, which in reality is at 97 different topics organized on their 28 observations.
We're basically closed.
Are you sending anyway, that's how we achieved during the second week of May to a full assessment again.
We will see depending on the results in Mexico with a request to the return of capital one.
And that process after that thousand can take from two to three months, we have Mexico would return you've got one by let's say it every year.
<unk>.
Yes.
That's great. Thank you very much.
Thanks Renee.
Yeah.
Our next question comes from Mike Lindenberg with Deutsche Bank. Please go ahead.
Oh, Hey, good morning, everyone, Hey, hunger back too.
Kind of a long term plans for your Central American Operation you talked about you know overtime 20 airplanes five years out.
That include any service that you would be flying to South America or is that is that a separate segment.
Michael we.
Medium term potential of 20 aircraft that you're rightly, saying that is for our El Salvador in operating certificate and the Costa Rican operating certificate.
<unk> to the U S, Mexico intra Central America, and South America. So it includes the whole thing okay. Okay, and so I guess as I think about South America. It looks like it's going to be both your essential American certificates as well as your Mexican certificates. So it's sort of a combination of both thats, probably the right way to do that.
Sure.
Okay, Great Michael Okay, and then just with respect.
Expect to.
Corporate travel and maybe then price sensitive business or even more granularly small medium enterprises.
You know hold are you you you came out and just said look you know we don't we carry very little business traffic and I know you've always carried some.
But I keep looking at that market share chart and you are up to.
With a 40%.
You know you are sizable.
A sizable.
And in the marketplace.
There are a lot of city pairs that you serve that nobody else serves and I don't see corporate people, taking the bus isn't there a real opportunity here for volt Polaris.
Matt just a bigger share of corporate even if it's the most price sensitive corporate.
Very curious on kind of your long term plans on that because.
It seems like it's a real profitable opportunity in <unk>.
Maybe youre just not going after.
Yes, absolutely I think as the largest player in Mexico, we have to look at all market segments. We have recently fortified our trunk routes out of Mexico City to Monterrey, and Guadalajara, and as you rightly point out we are getting some of the price sensitive business customers, especially in the small and medium size enterprise.
<unk>.
We have also introduced.
Some features of ancillary bundles that are geared towards.
More of a corporate customer more of a business customer we have a new bundle called <unk> business.
That gives the business customers some more optionality and in exchange for.
An additional fee and so we are actively looking at that segment and as we grow in the domestic market, but also to the largest destinations in the U S. We are bound to make inroads into that segment, having said that we.
We do recognize that business traffic is still below pre pandemic levels and that the VFR and leisure segments are much more resilient in the recovery.
Okay can you just remind me like pre pandemic.
Price sensitive business or estimate what was that about 10%.
Of your.
Of your of your sort of passenger if you look across your passenger segments of revenue as it can maybe it was less than 10%.
It was about 20%.
Traffic pre pandemic, mostly domestic.
Whereas VFR was about 50% and leisure was about 25% to 30% so.
That was pre pandemic and we are.
Seeing slightly higher VFR and leisure participation right now because precisely the business traffic is still behind pre pandemic levels. Okay. Okay. That's helpful. Okay. Great. Thanks, Thanks, everyone.
Thank you Michael.
Yeah.
Our next question comes from Stephen Trent with Citi. Please go ahead.
Good morning, everyone and thanks very much for taking my question.
Kind of a quick follow up on what Helane was asking about the bus. If I may you know what are you thinking about the.
Potential for enhanced offer of going from bust plane.
You know.
Are you aware of any of these Interstate bus operators that you know even have any sort of.
Loyalty program or something that remotely it looks like our loyalty program and you know and I would guess that.
I, probably don't have stuff like yeah loss or our Cobranded cards, just sort of.
Wanted to get a little bit of high level color on the potential difference in the offer thank you.
Yes, absolutely Stephen you're right we have.
Enhanced our product offering to attract customers with services.
So there's elements in products that are not available on the buses precisely the package holiday.
Options and RV club, which gives the most price sensitive customers some additional discounts.
Also I'd like to point out that the.
The buses are relatively unsophisticated prices in terms of revenue management.
Which gives us an advantage and in in yielding and generating more revenues per passenger.
Okay Super hunger. Thank you and just one really quick follow up just.
Any high level thoughts about you know how the ops are going so far and in Santa Lucia and kind of customer reaction et cetera.
Those are in the level of 78% to three wounds that we have.
We.
Observing the market fell off we're observing it.
Good day.
Ground groups.
Roof.
We're watching the entire operation very carefully.
That's the update that we have.
We did launch a.
Requirement to AIA Park start flying from sometimes you got cool.
<unk>.
A year.
And that's where we are from you so you get that.
Enforces the VFR traffic turnaround there.
Yeah.
Okay very helpful. Thanks, very much for that Enrique.
Hum.
Our next question comes from Pablo.
She likes to Oh, Craig. Please go ahead.
Yes.
Hi, everybody. Thanks for taking my question I.
I just have a follow up to <unk> comment on the pent up demand.
There is the.
Demand recovery has been impressive so I am still curious too.
To learn.
Uh huh.
This idea of are there still a pent up demand driven because.
Because I thought that leisure was already back to pre pandemic levels, perhaps be acquired as well, but if you can provide.
Right I'll give you more color on that because there are some low hanging fruit is killed that youre planning to.
To improve over the next few quarters. Thank you.
Yeah, Let me give you some color on how we're seeing things right now in terms of sales in forward bookings.
So you might remember that during the omicron an episode.
Midway through the quarter, we did see it.
A reduction in sales.
<unk> week episodes wherever.
Where we did have a small impact for the quarter.
This was obviously a seasonally low time of travel for us anyway.
And then we had a very successful anniversary promotion, which is mid March and we saw that demand and pricing strength continues, especially for forward bookings into the second quarter and even into the second half of the year.
And that strength of the bookings has really continued.
<unk> April .
We continue to be excited about the summer.
And I think that really pointed toward that pent up demand that you were mentioning that the resiliency of the consumer.
Especially in our segments deletions in the VFR segment.
They've been proven.
Very strong.
We're seeing that strength continue carrying us forward.
So so we continue to be quite constructive about the topline going into the second quarter.
Perfect very clear thank you very much.
Our next question comes from Alejandro the month with Amoco No any credit Suisse. Please go ahead.
Thank you Enrique Colbert, having me and thank you for Michael.
Just a just a quick question on <unk>.
Your thoughts and how the Mexican market.
Has been accepting the price increases in the base pairs.
Consider that considering the future.
<unk> come a music higher oil prices and the higher inflation environment. So.
Any color on that it might be very useful thank you.
So.
Let me tell you that as we mentioned during the call in the first quarter, we demonstrated that we were able to offset 95% of the fuel.
Price and volume increases.
And we sustained a healthy load factors and <unk>.
Travelling level so the customer.
Really did accept.
Our price increases now oil price increases, obviously affect the entire transportation and tourism in.
Industry and given our cost structure.
And network and market position, we believe that we are extremely well positioned to pass on some of the effect of rising fuel prices.
To our customers that's eaten into future.
Nevertheless, we do need to emphasize that as an ultra low cost carrier our prime focus will always be the focus on volume first.
And if you look at <unk>.
Our fuel efficient fleet of 800000 years I'll share price increases need.
Need to increase proportionately less than our competitors' fares.
And then if you look at the market as a whole we have observed in the domestic market.
A lot more rationality in terms of pricing.
In the post Covid era and from all of the remaining competitors.
So we continue to be.
Positive about being able to partially offset fuel price increases into higher trust.
Okay. Thank you.
And then my second question if I may.
And do you have any update on the potential over during the mask mandate in Mexico similar to what's happened we saw in the U S.
They are eventually do you believe that the restriction lift could improve demand than we can right.
You've been declared costumers confidence to travel shape.
So.
No.
To us which was the first one is what's going on in the domestic branch can markets were mixed contracts. We continue to pilot a compulsory much usage policy because that's what the authorities requirement.
And the second one is what we're doing in the in the in the North Palm.
International flights.
Where we moved towards a compulsory usage to a strong recommendation.
Using the masks.
Okay, but do you believe or do you have any update on the potential return of the mask mandate in Mexico.
No not.
No indications will finalize a couple of thoughts.
Okay. Thank you.
Yeah.
Yeah.
This concludes thank you brief question.
Thank you very much to everybody and I want to apologize because of the system sharp.
We have I want to express my sincere gratitude to our affirmative ambassadors divorce, the royalty rectors investors bankers and resource and the suppliers for their commitment and support the customer and Polaris to this exciting position with such an opportunity. Thank you very much to everybody and it's great to hear you.
Participating in this call.
Yeah.
This concludes that the last conference call for today. Thank you very much for your participation and have a nice day.
Yeah.