Q2 2024 Controladora Vuela Compañía de Aviación SAB de CV Earnings Call

Operator: Good morning everyone. Thank you for standing by. Welcome to Volaris' second quarter 2024 financial results conference call. All lines are in listen-only mode.

Good morning, everyone. Thank you for standing by welcome to Valores second quarter 2024 financial results Conference call. All lines are in listen only mode. Following the company's presentation. We will open the call up for your questions. Please note that we are recording this season.

Operator: Following the company's presentation, we will open the call up for your questions. Please note that we are recording this event. This event is also being broadcast live via a webcast and can be accessed through the Volaris website. At this point, I would now like to turn the call over to Ricardo Martnez, Investor Relations Director. Please go ahead, Ricardo.

Speaker Change: Uh huh.

Speaker Change: This event is also being broadcast live via webcast and can be accessed through the valores website. At this point I would now like to turn the call over to Ricardo Martinez.

Buster Relations director. Please go ahead Ricardo.

Ricardo Martnez: Good morning, and thank you for joining the call. With us is our president and CEO, Enrique Beltranena; our airline executive vice president, Holger Blankenstein, and our Chief Financial Officer, Jaime Polo. They will be discussing the company's second quarter 2024 results. Afterward, we will move on to your questions.

Speaker Change: Good morning, and thank you for joining the call.

Speaker Change: With us is our president and C E O Enrique will turn into.

Our airline executive Vice President Holger Blanka Stein.

Jaime Esteban Pous Fernandez: Our Chief Financial Officer Jaime pose.

Speaker Change: They will be discussing the company's second quarter 2024 result.

Speaker Change: After work, we will move on to your questions.

Ricardo Martnez: Please note that this call is for investors and analysts only. Before we begin, please remember that this call may include forward-looking statements within the meaning of applicable security laws. Forward-looking statements are subject to several factors that could cause the company's results to differ materially from expectations, as described in the company's filings with the United States SEC and Mexico's CNBB. These statements speak only as of the day they are made, and Bolares undertakes no obligation to update or modify any forward-looking statement. As in our earnings per release, our numbers are in U.S. dollars compared to the second quarter of 2023, unless otherwise noted. And with that, I will turn the call over to Enrique.

Speaker Change: Please note that this call is for investors and analysts only.

Speaker Change: Before we begin please remember that this call may include forward looking statements within the meaning of applicable securities laws.

Speaker Change: Forward looking statements are subject to several factors that could cause the company's results to differ materially from expectation.

Speaker Change: Described in the company's filings with the United States S E T and Mexico C and B B.

Speaker Change: These statements speak only as of the day. They are made and Polaris undertakes no obligation to update or modify any forward looking statement.

Speaker Change: As in our earnings press release, our numbers are in U S dollars compared to the second quarter of 2023, unless otherwise noted.

Speaker Change: And with that I will turn the call over to Eric.

Enrique Beltranena: Good morning, everyone, and thank you for joining us. Volaris continues to perform positively, recording our highest absolute EVIDAR for the second quarter. This achievement is notable given that we have been managing a capacity reduction driven by accelerated engine inspections for nearly one year, which has grounded approximately one-fourth of our fleet. Our unwavering focus on execution has enabled us to deliver strong results during this period of disruption. Our mitigation plan to address the challenges of the groundings is on track and yielding positive results, as we have largely achieved our guidance for each period since the inspection bulletins began in last year's third quarter. Olaris execution has been focused on.

Eric: Good morning, everyone and thank you for joining us.

Speaker Change: Well there is continues to perform positively recording our highest absolute EBITDAR for the second quarter. You said shipment is notable given that we have been managing a capacity reduction driven by accelerated engine inspections for nearly one year, which has grounded.

Speaker Change: Approximately one fourth of our fleet.

Speaker Change: Our unwavering focus on execution has enabled us to deliver strong results during this period of disruption.

Our mitigation plans to address the challenges of the groundings is on track and yielding positive results as we have largely achieved our guidance for each period since the inspection bulletins began in last year's third quarter Polaris execution has been focused on.

Enrique Beltranena: Delivering excellent operations to enhance our customer service and aggressively managing the schedule as the fleet plan changes to minimize disruptions. And continue our emphasis on obsessive cost control. Regarding the GTFs, after meeting with Pratt & Whitney recently, I can provide three important updates that make me cautiously optimistic about the situation. First, we feel confident to improve our full-year ASM guidance to a year-over-year reduction of approximately minus 14% compared to our previous guidance of minus 16% to 18%.

Speaker Change: The lever and excellent operations to enhance our customer service.

Speaker Change: Aggressively managing the schedule as the fleet plan changes to minimize disruptions and continuing our emphasis on obsessive cost control.

Speaker Change: Regarding the G. T S. After meeting with pregnant with me recently I couldn't provide three important updates that make me cautiously optimistic about this situation first.

Speaker Change: First we feel confident to improve our full year ASM guidance do a year over year reduction of approximately minus 14% compared to our previous guidance of minus 16% to 18%.

Enrique Beltranena: Bolares and Pratt & Whitney have successfully coordinated slots, spare parts, and materials with high certainty for the next 180 days. As a result, better turnaround times are forecasted for our engines during this period. Nonetheless, Pratt & Whitney is currently at its highest volume and most critical point of engine inspection.

Speaker Change: Well there isn't pregnant with me have successfully worthy need is lot spare parts and materials with high certainty for the next 180 days as a result, better turnaround times are forecasted for our engines during this period.

Speaker Change: Nonetheless, Pratt <unk> Whitney is currently at its highest volume and most critical point of engine inspections.

Enrique Beltranena: Second, powder metal has been a major focus for Brett and Whitney, and they are starting to recover by ramping up material availability and MRO capacity. Third, I was seriously impressed by Bratton Whitney and International Aeroengine's $850 million investment in the new shop and part production facility in Asheville, North Carolina. This facility has started operations that will continue to increase production over the next 80 months. I acknowledge the efforts Pratt & Whitney and International Arranges are making, and they're supporting overcoming this situation. While I am more positive, it is important to recognize that the engine's time on the wing remains a real challenge.

Speaker Change: Second other meta has been a major focus for Britain with me and they were starting to recover by ramping up material availability and MRO capacity.

Speaker Change: Third our seriously impressed by breathing with me in International Law range is $850 million investment in the new shop in part production facility in Asheville, North Carolina.

Speaker Change: This facility has started operations, who will continue to increase production over the next 18 months.

Speaker Change: I acknowledge therefore, it's Pratt <unk> Whitney and international arranges are making and they are supporting overcoming the situation.

Speaker Change: While I am more positive it is important to recognize that the engines time on wing remains a real challenge.

Enrique Beltranena: If you take one thing away from today's call moving forward, it is this: as grounded aircraft return to our productive fleet, we are committed to prudent and rational growth, prioritizing profitability. Importantly, we expect recent unit revenue levels to remain resilient as Volaris' capacity gradually returns. By shifting ASMs into the cross-border market, our T-RASM strength reflects a well-balanced market mix aimed at maximizing profitability. Polaris' position as an ultra-low-cost carrier in Mexico differs in many ways from ultra-low-cost carriers in the U.S. We are the largest airline in Mexico by passengers, which gives us a strong relative domestic market share and cost leadership over legacy carriers.

Speaker Change: If you take one thing away from today's call moving for it is this as grounded aircraft return to our proactive fleet, we are committed to prudent and rational growth prioritizing profitability.

Speaker Change: Importantly, we expect recent unit revenue levels to remain resilient as Larry says capacity gradually returns right.

Larry: By shifting ASM seem to the cross border market, our T. RASM strength reflects our well balanced market mixed aimed at maximizing profitability.

Speaker Change: Polaris is position as an ultra low cost carrier in Mexico. The fares in many ways from ultra low cost carriers in the U S. We are the largest early in new Mexico by passengers, which gives us a strong relative domestic market share and cost leadership. However, legacy carriers are regionally.

Holger Blankenstein: Additionally, Mexico has a unique capacity to convert bus passengers, which has driven growth in the country's emerging air travel market over the last 15 years. Our success is not only due to our profound ultra-low cost pricing and ancillary strategies but also the quality of our service, our ability to encourage repeat travel, and the loyalty of our visiting friends and relatives past. Finally, we have maintained a significant advantage over the U.S. industry through dramatic cost control, avoiding expensive short-term wet leases and sustaining our efficient cost structure with approximately 70% of our costs being charged. With that, I will now turn the call over to Holger to discuss commercial and operating performance for the quarter. Thank you, and good morning.

Speaker Change: Mexico has a unique capacity to convert was passengers, which has driven growth in the countries emerging air travel market in the last 15 years. Our success is not only due to our profile of an ultra low cost price imminent ciliary strategies, but also the quality of our series our ability to encourage.

Speaker Change: Travel and the loyalty of our visiting friends and relative passive finally, we have maintained a significant advantage over the U S industry through the Rhematic cost control avoiding expensive short term with leases and sustaining our efficient cost structure with approximately 70% of our costs.

Speaker Change: Embraer.

Speaker Change: With that I will now turn the call over to Holger to discuss commercial and operating performance for the quarter.

Holger Blankenstein: Reflecting on the first half of 2024, our network planning, schedule management, and customer service have been key factors in overcoming the impact of the groundings on our customers. We have turned these challenges into opportunities, consolidating our position as the leading low-cost operator in growing and attractive markets. I will explain what this means in a moment, but first, I will elaborate on Volare's second quarter operational results. During the quarter, we generated TRASM of 80.89 cents. 12% increase year-over-year and a load factor of 85.5% compared to 84.6% a year ago. Despite 17% lower capacity, total operating revenue contracted just 7% year over year.

Holger: Thank you and good morning, reflecting on the first half of 2020 for our network planning schedule management and customer service have been key factors in overcoming the impact of the groundings on our customers.

Operator: Timers. We have turned these challenges into opportunities, consolidating our position as the leading low-cost operator in growing and attractive markets.

Holger: We have turn these challenges into opportunities consolidating.

Holger: Consolidating our position as the leading low cost operator.

Holger: In growing and attractive markets.

Operator: I will explain what this means in a moment, but first, I will elaborate on Volar's second quarter operational results. During the quarter, we generated trasm of 80.89 cents, a 12% increase year over year and a load factor of 85.5% compared to 84.6% a year ago. Despite 17% lower capacity, total operating revenue contracted just 7% year over year.

I will explain what this means in a moment, but first I will elaborate on our second quarter operational results.

Holger: During the quarter, we generated <unk> of 80 point 89 cents.

Holger: A 12% increase year over year, and the load factor of 85, 5% compared to 84, 6% a year ago.

Holger: Despite 17% lower capacity total operating revenue contracted just 7% year over year.

Holger Blankenstein: We now expect total revenue for the full year of 2024 to be close to 2023, even with a double-digit reduction in capacity. Ancillaries once again comprised more than 50% of our total revenues, with ancillaries per passenger rising 15% year over year to $53. Meanwhile, our push into non-air ancillaries continues to be successful. Our V-Club membership program featuring our zero fare accounts for over 15 percent of our sales, and our annual pass offering is performing well.

Operator: We now expect total revenue for the full year of 2024 to be close to 2023, even with a double-digit reduction in capacity. And salaries want to gain comprised more than 50% of our total revenues, with an salaries per passenger rising 15% year over year to 53 dollars.

Holger: We now expect total revenue for the full year of 2024 to be close to 2023.

Holger: Even with a double digit reduction in capacity.

Holger: And salaries once again comprised more than 50% of our total revenues with ancillary per passenger rising 15% year over year to $53.

Operator: Meanwhile, our push into non-air and salaries continues to be successful. Our weak over 15% of our sales, and our annual pass offering is performing well. That is what in recommend about generating higher repeat travel and customer loyalty, among our VFR passengers.

Holger: Meanwhile, our push into non air ancillary is continues to be successful RV club membership program, featuring our zero fair accounts for over 15% of our sales and our annual pass offering is performing well.

Holger Blankenstein: That is what Enrique meant about generating higher repeat travel and customer loyalty among our VFR passengers. We are also delivering on punctuality. Our on-time performance within 15 minutes during the second quarter was 85.6%, with on-time departures rising 8 points over our performance in the second quarter of last year.

Speaker Change: That is what Enrique meant about generating a higher repeat travel and customer loyalty among our VFR passengers.

Operator: We are also delivering on punctuality. Our on-time performance within 15 minutes during the second quarter was 85.6%. With on-time departures rising 8 points over our performance in the second quarter of last year.

Speaker Change: We are also delivering on punctuality.

Speaker Change: Our on time performance within 15 minutes during the second quarter was 85, 6%.

Speaker Change: With on time departures rising eight points over our performance in the second quarter of last year.

Holger Blankenstein: The total number of passengers transported increased consistently month by month, and we announced new routes, Guadalajara to Tulum, Guadalajara to San Jose, Costa Rica, Miami to San Salvador, Cancun to McAllen, and Tijuana to Las Vegas. Our positive performance is due to several drivers. In the Mexican market, we have observed strong demand resulting in robust revenue per passenger and load factors above 90%. In the U.S., our increased capacity is bolstering consolidated unit revenue and profitability.

Operator: The total number of pass just transported increased consistently months by month, and we announced new routes: Warlahara to Tulum, Warlahara to San Jose, Costa Rica, Miami to San Salvador, Cancun to Macallan, and Tejwana to Las Vegas.

Speaker Change: Total number of passengers transported increased consistently month by month, and we announced new routes Guadalajara too long.

Speaker Change: While the harder to San Jose Costa Rica.

Speaker Change: Miami to San Salvador.

Speaker Change: According to Mcallen.

Speaker Change: And Tijuana to Las Vegas.

Operator: Our positive performance is due to several drivers. In the Mexican market, we have observed strong demand, resulting in robust revenue per passenger and load factors above 90%. In the U.S., our increased capacity is bolstering consolidated unit revenue and profitability. Supported by structurally higher fares and ancillary pricing. The cross-border capacity we have added over the past year has continued to ramp up, with July load factors and fares showing solid improvement. Despite the schedule impacts related to Pratt and Whitney engines, we were diligent in managing accommodations, and as a result, have not experienced a significant number of customer complaints.

Speaker Change: Our positive performance is due to several drivers in.

Speaker Change: In the Mexican market, we have observed strong demand, resulting in robust revenue per passenger and load factors above 90%.

Speaker Change: In the U S. Our increased capacity is bolstering consolidated unit revenue and profitability supported.

Holger Blankenstein: Supported by Structurally High Affairs and Ancillary Pricing, the cross-border capacity we have added over the past year has continued to ramp up, with July load factors and fares showing solid improvement. Despite the schedule impacts related to Pratt & Whitney engines, we were diligent in managing accommodations and, as a result, have not experienced a significant number of customer complaints. We are seeing the result in an improved Net Promoter Score of above 40% going forward.

Speaker Change: Supported by structurally higher fares and ancillary pricing.

Speaker Change: The cross border capacity, we have added over the past year.

Speaker Change: <unk> continued to ramp up with July load factors and fast showing solid improvement.

Despite the schedule impacts related to Pratt and Whitney engines, we were diligent in managing our accommodations and as a result have not experienced a significant number of customer complaints.

Operator: We are seeing the result in an improved Net Promoter Score of above 40%.

Speaker Change: We are seeing the result in an improved net promoter score of above 40%.

Operator: Going forward, as we move into the seasonally stronger second half, our bookings indicate ongoing robust performance.

Speaker Change: Going forward.

Holger Blankenstein: As we move into the seasonally stronger second half, our bookings indicate ongoing robust performance. Trends for the summer high season are slightly above our already strong expectations in Allmark, and we anticipate close-in bookings will remain healthy. A key driver of low-cost customer service is delivering the Volaris promise, friendly service, self-service solutions, high schedule completion, good on-time performance, and optional ancillaries. Therefore, we are investing heavily in better self-service solutions on the day of travel with a completely new mobile app, and on the scheduling side, during the second quarter, Bolares implemented an evolution of its itinerary. This schedule prioritizes stability, featuring a new base schedule where aircraft are fixed to core routes, while other aircraft remain flexible across the network. This approach has immediately improved reliability and led to fewer cancellations.

Speaker Change: As we move into the seasonally stronger second half.

Speaker Change: Our bookings indicate ongoing robust performance.

Operator: France. Trends for the summer sea high season are slightly above our already strong expectations in all markets, and we anticipate close-in bookings will remain healthy. A key driver of low-cost customer service is delivering the Volares Promise, friendly service, self-service solutions, high-skidial competition, good on-time performance, and optional antillaries. Therefore, we are investing heavily in better self-service solutions on the day of travel with a completely new mobile app, and on the scheduling side during the second quarter, Volares implemented an evolution of its itinerary. This schedule prioritizes stability, featuring a new base schedule where aircraft are fixed to call routes while other aircraft remains flexible across the network.

Speaker Change: Trends for the summer see high season are slightly above our already strong expectations in all markets and we anticipate close in bookings will remain healthy.

Speaker Change: A key driver of low cost customer service is delivering the Polaris promise friendly service self service solutions high scheduled completion.

Speaker Change: Good on time performance.

Speaker Change: And optional ancillary.

Therefore, we are investing heavily in better self service solutions on the day of travel with a completely new mobile app.

Speaker Change: And on the scheduling side during the second quarter Polaris implemented and evolution of its 18 honorary.

Speaker Change: This schedule prioritizes stability.

Speaker Change: <unk>, a new base schedule, where aircraft are fixed to core routes, while other aircraft remain flexible across the network.

Operator: This approach has immediately improved reliability and led to fewer cancellations.

Speaker Change: This approach has immediately improve reliability and led to fewer cancellations.

Operator: I want to reiterate the point that we will exercise careful control in restoring our network's capacity over the next few years. The impact of the accelerated inspections will persist through at least 2026, and we do not expect to reach 2023 capacity levels next year. Additionally, as we bring back capacity, we now have more options within our network, including the Mexico U.S. Transporter market, while also monitoring opportunities to strengthen the domestic network and Central America.

Holger Blankenstein: I want to reiterate the point that we will exercise careful control in restoring our network's capacity over the next few years. The impact of the accelerated inspections will persist through at least 2026, and we do not expect to reach 2023 capacity levels next year. Additionally, as we bring back capacity, we now have more options within our network, including the Mexico-U.S. transporter market, while also monitoring opportunities to strengthen the domestic network and Central America.

Speaker Change: I want to reiterate the point that we will exercise careful control and restoring our network's capacity over the next few years.

Speaker Change: The impact of the accelerated inspections will persist through at least 2026.

Speaker Change: And we do not expect to reach 2023 capacity levels next year.

Additionally, as we bring back capacity, we now have more options within our network, including the Mexico U S transporter market, while also monitoring opportunities to strengthen the domestic network and Central America.

Operator: Now, I would like to revisit and request comment about dedicating ourselves to profitable growth and how Volares differs in many ways from ultra-low-cost carriers in the U.S. Over the past decade, we have accelerated growth to scale up our markets and become Mexico's leading airline. With our brand and network established, we are putting our leadership and differentiation to work to drive profitability.

Holger Blankenstein: Now, I would like to revisit Enrique's comment about dedicating ourselves to profitable growth and how Volaris differs in many ways from ultra-low cost carriers in the U.S. Over the past decade, we have accelerated growth to scale up our markets and become Mexico's leading airline. With our brand and network established, we are putting our leadership and differentiation to work to drive profitability. No U.S. operator has the level of market share equivalent to our penetration in the Mexican domestic market, and no Latin American LCC has our U.S. footprint.

Speaker Change: Now I would like to revisit and weakest comment about dedicating ourselves to profitable growth and how valores differs in many ways from ultra low cost carriers in the U S.

Speaker Change: Over the past decade, we have accelerated growth to scale up our markets and become Mexico's leading airline.

Speaker Change: With our branded network established we are putting our leadership and differentiation to work to drive profitability.

Operator: No U.S. operator has the level of market share equivalent to our penetration in the Mexican domestic market, and no Latin American LCC has our U.S. footprint.

Speaker Change: No U S. Operator has the level of market share equivalent to our penetration in the Mexican domestic market and no Latin American LCC has our U S footprint.

Operator: We have a more balanced network between Mexico and the U.S. with the return of Category One. We now have two significant markets at our disposal to grow capacity. Unlike recent years, when category two forced us to allocate additional capacity to the domestic market, resulting in an oversupplied market. We now have a stable, competitive domestic market with rational players. Domestically, being low cost means we can keep fairs low on a sustainable basis, building affinity and recurring flying in our core markets, while stimulating demand from bus switches in less developed market.

Holger Blankenstein: We have a more balanced network between Mexico and the U.S. with the return of Category 1. We now have two significant markets at our disposal to grow capacity. Unlike recent years when Category 2 forced us to allocate additional capacity to the domestic market, resulting in an oversupplied market, we now have a stable, competitive domestic market with rational players.

Speaker Change: We have a more balanced network between Mexico, and the U S with the return of category one.

Speaker Change: We now have two significant markets at our disposal to grow capacity.

Speaker Change: Unlike recent years when category two forced us to allocate additional capacity to the domestic market, resulting in an oversupplied market.

Speaker Change: We now have a stable competitive domestic market with rational players.

Jaime Polo: Domestically, being low cost means we can keep fares low on a sustainable basis, building affinity and recurrent flying in our core markets, while stimulating demand from bus switchers in less developed markets. In the U.S. cross-border market, where we expect travel to increase over the next decade due to nearshoring investments, low cost means we can price at levels that our U.S. competitors cannot match. Additionally, we primarily serve the resilient VFR markets where we have a competitive advantage with large Hispanic communities like Chicago, Denver, Houston, Los Angeles, and Oakland.

Speaker Change: Domestically being low cost means we can keep fares low on a sustainable basis building affinity and recurring flying in our core markets, while stimulating demand from bus switchers in less developed markets.

Speaker Change: In the U S Cross border market, where we expect travel to increase over the next decade due to near shoring investments.

Speaker Change: Low cost means we can price at levels that are U S competitors cannot match.

Speaker Change: Additionally, we primarily serve the resilient VFR markets, where we have a competitive advantage with large Hispanic communities like Chicago, Denver, Houston, Los Angeles and Oakland.

Jaime Polo: Further, the reactivation of our culture with Frontier, which historically contributed two percentage points of additional international load factors, is expected to be a tailwind going forward. Finally, consistent ancillary penetration will be a further differentiator, and we are continuing to evolve our offerings. Unbundling services allow passengers to customize their travel experience and reduce space fears, which is ideally suited for a high-growth emerging aviation market. We are also tailoring our ancillary offering more and more to our different customer segments.

Further the reactivation of our Codeshare with frontier.

Speaker Change: Which historically contributed two percentage points of additional international load factors.

Speaker Change: Is expected to be a tailwind going forward.

Speaker Change: Finally, consistent ancillary penetration will be a further differentiator and we are continuing to evolve our offerings.

Unbundling services allow passengers to customize their travel experience and reduce base fares.

Speaker Change: Which is ideally suited for our high growth emerging aviation market.

Speaker Change: We're also tailoring, our ancillary offering more and more to our different customer segments. For example, we have a business ancillary combo or we're offering free changes to a higher fare combos.

Jaime Polo: For example, we have a business ancillary combo, or we are offering free changes to our HireFair combo. I will now turn the call over to Jaime to walk through our second quarter financial performance. Thank you, Holger.

Jaime Polo: Our second quarter financial results reflect the ongoing execution of our GTF accelerated inspection mitigation plan, robust demand in our domestic market, and our Continued Discipline in Controlling Costs. All together, this produced our highest absolute divider for a second quarter and met market expectations and guidelines.

Speaker Change: I will now turn the call over to Jaime to walk through our second quarter financial performance.

Javier: Thank you Javier.

Jaime: Our second quarter financial results reflect the ongoing execution of our GTA facility read any inspection mitigation plan.

Jaime: Robust demand in our domestic market and our continued discipline in controlling costs.

Together these produced our highest absolute visitor for our second quarter and med market expectations and guidance.

Jaime Polo: As the top-line drivers for these results were already covered, I will concentrate my comments on cost, cash flow, and balance sheet. Compared to the same period last year, our second quarter 2024 results are: Total operating revenues decreased only 7% to $726 million due to strong domestic demand and total revenue per passenger improvement, notwithstanding the 17% year-over-year reduction in capacity. Total cash flow increased only 9% to $8.08. Our average economic fuel cost increased by 6% to $2.86 per gallon, while gas on mixed fuel came in at $5.33, better than guidance with an increase of 11% year over year.

Jaime: As the top line drivers for these results were already cover.

Jaime: Trade my comments on cost cash flow and balance sheet.

Jaime: Compared to the same period last year, our second quarter 2024 of his sole Saar.

Speaker Change: Total operating revenues decreased only 7% to seven coloring 26 billion due to strong domestic demand and total revenue per passenger improvement notwithstanding the 17% year over year reduction in capacity.

Speaker Change: Total gasoline increased only 9%.

Speaker Change: To wait points here, where it says.

Speaker Change: Our average economic fuel cost increased by 6% to $2 86 per gallon while.

Speaker Change: While CASM ex fuel came in at $5.33 better than guidance with an increase of 11% year over year.

Jaime Polo: This reflects our commitment to cost control and serves as an industry differentiator. By maintaining dramatic cost control, avoiding expensive short-term leases, and sustaining an efficient cost structure with approximately 70% of our costs being variable, we ensure our competitive advantage. In fact, we believe our cost gap compared to U.S. peers will continue to widen over time in the cross-border market.

Speaker Change: This reflects our commitment to cost control and serves as an industry differentiator.

Speaker Change: By maintaining dramatic cost control.

Speaker Change: Avoiding expensive short term with leases and sustaining an efficient cost structure with approximately 70% of our costs being viable we ensure our competitive advantage.

Speaker Change: In fact, we believe our cost gap compared to U S peers will continue to widen over time in the cross border market.

Jaime Polo: A key principle of our network shift to the U.S. is to increase our cash collection in U.S. dollars and protect our P&L from foreign exchange volatility between our top and bottom lines. We estimate that around 45% of our revenue collections will be in U.S. dollars, with a target of 90% of our cash balance held also in U.S. dollars. We book, sell, and lease baggage of $6.7 million in the other operating income line related to the delivery of the 2A321neo aligned with a long-term strategy of preserving the lowest rental costs throughout the life of our lease. Note that this line includes most of the PATS and WITNESS aircraft grounding compensation.

Speaker Change: I keep principal of our networks shift to the U S is to increase our cash collection in U S dollars and protect our P&L from foreign exchange volatility between our top and bottom lines.

Speaker Change: We estimate that around 45% of our revenue collections will be in U S dollars with a target of 90% of our cash balance scaled also in U S dollars.

Speaker Change: We walk sale and leaseback gains of $6 7 million in the other operating income line related to the delivery of two way through 'twenty, one Neil align with our long term strategy of preserving the lowest rental costs throughout the life of our leases.

Speaker Change: Note that this line includes most of pattern witnessed circa rounding compensation.

Jaime Polo: EBIT increased 29%, totaling $66 million, with an EBIT margin of 9.1%, up 2.6 percentage points. E-Vitar came in at $261 million, a 23% increase, while its E-Vitar margin was 36%, an improvement of 8.8 percentage points. These results reflect strong unit revenues and efficient cost control. As a reminder, both EVIT and EVITAR include patent rights with this compensation, as well as expenses from leases of the entire fleet, including aircraft on ground.

Speaker Change: EBIT increased 29% totaling $66 million with an EBIT margin of nine 1%.

Speaker Change: Up two six percentage points.

Speaker Change: EBITA came in at $261 million at 23% increase.

Speaker Change: Right.

Speaker Change: EBITDA margin was 36%.

Speaker Change: An improvement of eight eight percentage points. These results reflect strong generic revenues and efficient cost control.

Speaker Change: As a reminder.

Speaker Change: Davita inhibitor include patent with this compensation as well as expenses from leases over the entire fleet included aircraft on ground.

Jaime Polo: Net income rose to $10 million, translating to earnings per ADS of 9 cents. Cash flow provided by operating activities in the second quarter was $304,000,000.00. Outflows using investing and financing activities were $141 million and $149 million, respectively. Meanwhile, our second quarter CAPEX, excluding financed fleet pre-delivery payments, totaled $97 million, primarily driven by the acquisition of a spare engine. These investments are crucial for maintaining business continuity and mitigating disruptions to our core operations. Bolares ended the quarter with a total liquidity position of $758 million, representing 23% of the last 12 months' total operating revenue.

Speaker Change: Net income rose to 10 million.

Speaker Change: Translate into earnings per ads of <unk> cash.

Speaker Change: Cash flow provided by operating activities in the second quarter was 341 4 million.

Cash outflows.

Speaker Change: Outflows using investing and financing activities were 141 million and $149 million respectively.

Speaker Change: Meanwhile, our second quarter Capex, excluding finance fleet pre delivery payments totaled $97 million.

Speaker Change: Primarily driven by the acquisition of spare engines.

Speaker Change: Investments are crucial for maintaining business continuity and mitigate any disruptions to our core operations.

Speaker Change: <unk> ended the quarter with total liquidity position of $758 million.

Speaker Change: Representing 23% over the last 12 months total operating revenues.

Jaime Polo: As of June 30th, our net depth to air return ratio decreased to 2.9 times, from 3.3 times at the end of 2023, and from 3.1 times at the end of the first quarter of 2024; we expect to continue to deliver throughout the second half of the year. Now, looking at our first half of 2024 results compared to the same period in 2023. Total Operating Revenues were $1.5 billion, nearly flat against last year despite flying 50% fewer ASMs. Customs was 8.08 cents, a 4.8% increase. Average economic fuel cost fell by 4.5% to 9.93 cents per gallon, while gasomix fuel was 5.25 cents, 10.8% higher.

Speaker Change: As of June 30th our net debt to EBITDA ratio decreased to two nine times.

Frank three three times at the end of 2023 and from three one times at the end of the first quarter of 2024.

Speaker Change: We expect to continue to deleverage throughout the second half of the year.

Speaker Change: Now looking at our first half of 2024 results compared to the same period of 2023.

Speaker Change: Total operating revenues were $1 5 billion nearly flat against last year, despite flying 50% fewer subs.

Speaker Change: Gasoline was eight point Ceroid sense, a four 8% increase average economic fuel cost fell by four 5% to $9 93 per gallon.

Speaker Change: Gasoline ex fuel was $5.25 $10, 8% higher.

Jaime Polo: As discussed in our prior calls, this unit cost increase is primarily due to the engine-related aircraft rounding. EBIT was $107 million, up from $20 million in 2023. And EBIT margin was 11.4%, a 10.1 percentage points. At the bottom line, we recorded a $44 million net profit compared to a $65 million net loss a year ago, translating into earnings per ADS of $38,000.

Speaker Change: As discussed in our prior calls did unit cost increase is primarily due to the engine related or profound needs.

Speaker Change: EBIT was $107 million up from 20 million in 2023, and EBIT margin was 11, 4%.

Speaker Change: Up 10, one percentage points.

Speaker Change: At the bottom line, we recorded a 44 million net profit compared to a 65 million net loss a year ago translating into earnings per ads.

Speaker Change: Of 38 cents.

Jaime Polo: In its third year today, total 496 million, a 48% increase, with an in vitro margin of 33%, an increase of 11.1 percentage points. As of June 30th, our fleet consisted of 136 aircraft, up from 123 a year ago. During the quarter, we had an average of 31 aircraft on ground for engine inspection.

Speaker Change: You mean third year today total 496, million% to 48% increase with an EBITA margin of 33% an increase of 11, one percentage points.

Speaker Change: As of June 30, our fleet consisted of 136 aircraft up from 123, a year ago. During the quarter. We had an average of 31 aircraft on ground to pull the engine inspections.

Jaime Polo: We received two new A321neo aircraft during the second quarter, for a total of five new aircraft year-to-date from our order book with Airbus, plus 2,820 CEOs on their state operating leases as part of our mitigation plan for the engine inspection. Note that the next 30 aircraft deliveries from our order book have PDP financing. Including our financing for these PDPs, we have no significant near or medium-term debt opportunities.

Speaker Change: We received two new <unk> hundred 21, new aircraft during the second quarter.

For a total of five new aircraft year to date from a where are they with Airbus plus two 820 <unk> on their estate operating leases as part of our mitigation plan for the engine inspection.

Speaker Change: Note that the next 30 aircraft deliveries from our order book have PDP financing.

Speaker Change: In our financing for this piece, we have no significant near or medium term the apparent derivatives.

Jaime Polo: Finally, turning to guidance. Here today, our unit revenues, marketing expansion, and overall performance have met our goals. While we anticipate continued commercial strength, we are also mindful of industry supply chain disruptions and other uncertainties. However, we are confident in our ability to mitigate industry disruption and continue meeting guidance in the second half.

Speaker Change: Our capex net to finance piece for the first half of 2024.

Overall 180 million in line with our expectations.

Speaker Change: Finally.

Speaker Change: Turning to guidance year to date, our unit revenues margin expansion and overall performance have met our goals.

While we anticipate continued commercial strength, we're also mindful of industry supply chain disruptions and another uncertainty. However, we are confident in our ability to mitigate industry disruption and continue meeting guidance in the second half.

Jaime Polo: Therefore, in addition to the ASM update discussed earlier, we are maintaining our overall guidance. For the third quarter of 2024, we expect an ASM reduction of approximately 14% year-over-year. Classroom for around $0.093, Gasoline fuel of approximately $0.056 Finally, we expect an emitter margin of around 33% Our third quarter 2024 outlook assumes an average exchange rate of 8.4 to 8.6 Mexican pesos per U.S. dollar and an average U.S. Gulf Coast budget fuel price of 2.6 to 2.7 dollars per gallon. For the full year of 2024, our latest guidance is as follows.

Speaker Change: Therefore in addition to the ASM all that Dave discussed earlier, we are maintaining our overall guidance.

Speaker Change: For the third quarter of 2024, we expect an ASM reduction of approximately 14% year over year.

Speaker Change: Draw some of around nine 3% gas.

Speaker Change: Gasoline ex fuel of approximately five <unk>.

Speaker Change: Finally, we expect an EBITDA margin of around 33%.

Speaker Change: Our third quarter 2024 outlook assumes an average exchange rate of eight four to eight six Mexican pesos per U S. Dollar.

Speaker Change: And an average U S. Gulf Coast. This budget fuel price of two six to $2 $7 per gallon.

Speaker Change: For the full year of 2020 for our latest guidance is as follows we now expect an ASM reduction of around 40% year over year driven by the deployment of recently acquired spare engines. Another mitigation initiatives. We continue to expect an EBITA margin.

Jaime Polo: We now expect an ASM reduction of around 40% year-over-year driven by the deployment of recently acquired spare engines and other mitigation initiatives. We continue to expect an EVTAR margin of 32% to 34%, notwithstanding the adjustment in our FX assumption, and finally, CAPEX Net-to-Finance Fleet pre-delivery payments of $400 million driven by our purchases of spare engines and on change from our prior route. Our full year 2024 outlook assumes an average exchange rate of 17.8 to 18 Mexican pesos per U.S. dollar and an average U.S. Gulf Coast spot jet fuel price of 2.6 to 2.7 per gallon. Now, I will turn the call back over to Enrique for closing remarks. Thank you, Jaime.

Speaker Change: Of 32% to 34% notwithstanding their judgment in our FX assumption.

Speaker Change: And finally, Capex net to finance lead pre delivery payments of $400 million.

Speaker Change: Driven by our purchases of our spring is unchanged from our prior outlook.

Speaker Change: Our full year 2024 outlook assumes an average exchange rate of 17.8 to 18 Mexican pesos per U S dollar and an average U S. Gulf coast the spot jet fuel price of 2.6 to two seven per gallon now I will turn the call back over to Enrique for <unk>.

Enrique Beltranena: Over the past two decades, Volaris has pioneered the Mexican ultra-low-cost market. As our leadership has grown in recent years, the Mexican airline industry has become increasingly healthy and more competitive. Our industry's largest operators have successfully stimulated the market and served consumer demand for air travel well, driving a sustained growth rate of approximately three times that of national GDP. As the U.S. nearsuring burdens, nationwide mobility and transborder transportation will become increasingly critical for Mexican economic growth.

Enrique: <unk> remarks.

Enrique: Thank you Jaime over the past two decades Polaris has pioneered the Mexican ultra low cost market.

Enrique: Our leadership has grown in recent years, the Mexican airline industry has become increasingly healthy and more competitive.

Enrique: Our industry's largest operators have successfully stimulate the market and serve consumer demand for air travel well driving sustained growth rate of approximately three times that of national GDP.

Enrique: As U S near shoring burdens nationwide mobility, and trans border transportation will become increasingly critical for Mexican economic growth.

Enrique Beltranena: Given its strategic position and the outlook for the industry, we expect continuity in aviation policy in our region. Thank you very much for listening. Operator, please open the line for questions. Thank you, as always, to our family of ambassadors, board of directors, investors, bankers, lessors, and suppliers for their commitment and support. I look forward to addressing you all again on the next call. Thank you very much.

Enrique: Giving its strategic position and the outlook for the industry, we expect continuing in aviation policy in our region.

Thank you very much for listening operator, please open the line for questions. Thank you as always to our family of Ambassadors Board of directors investors bankers lessors and suppliers for their commitment and support.

Enrique: I look forward to addressing you all again on the next call.

Operator: Thank you. The floor is now open for questions. If you have a question, please dial Star 1-1 on your phone at this time or any time. Questions will be taken in the order they are received. We ask that when you post your question, you pick up your handset to provide optimum sound quality. Similarly, those following the presentation via the webcast may post their questions on the platform. The management team will answer them during this call, or the Volaris Investor Relations team will follow up after the conference call is finished.

Enrique: Thank you very much.

Speaker Change: Thank you the floor is now open for questions.

Speaker Change: If you have a question. Please dial star one one on your phone at this time or any time.

Speaker Change: <unk> will be taken in the order. They are received we asked state when you post. Your question you pick up your handset to provide optimum sound quality. Those following the presentation via the webcast may post their questions on the platform.

Speaker Change: The management team will answer them during this call or the Valores Investor Relations team will follow up after the conference call is finished.

Operator: To send your questions via the webcast platform, click on the Ask a Question button and type your inquiry. Please hold while we poll for questions. Our first question comes from the line of Duane Pfennigwerth from Evercore ISI.

Speaker Change: Send your questions via the webcast platform click on the ask a question button and type of inquiry.

Speaker Change: These hold while we poll for questions.

Duane Pfennigwerth: Our first question comes from the line of Duane <unk> from Evercore ISI.

Duane Pfennigwerth: Hey, hey, thank you. Good morning.

Duane Pfennigwerth: Hey, Thank you good morning.

Unknown Executive: I wanted to ask you about the industry's ability to flex up capacity during peak demand periods. Obviously, the industry overall is pretty constrained right now, but if we think about like off-peak versus peak demand periods, would you say that peaks are even more constrained? Your commentary about July sounds pretty encouraging. I just wanted to kind of put that in context.

Duane Pfennigwerth: I wanted to ask you about the industry.

Speaker Change: <unk> ability to flex up.

Speaker Change: Past city during peak demand periods, obviously the industry overall.

Speaker Change: Pretty constrained right now.

But if we think about like off peak versus peak demand periods would you say that peaks are even more constrained.

Speaker Change: Your commentary about July it sounds pretty encouraging I, just wanted to kind of put that in context.

Unknown Executive: So yes, clearly, domestic capacity is constrained both in low season and high season. We've implemented a change to our schedule where we have a very stable schedule throughout the year, and we have peak lines that we add during the peak seasons. The summer season, July and August, is a case in point. And we are very encouraged with July trends that are currently trending above our expectations.

Speaker Change: So yes, clearly the domestic capacity is constrained bolt in low season high season, we've implemented.

Speaker Change: A change to our schedule, where we have a very stable scheduled throughout the year and we have peak lines that we add during the peak seasons.

Speaker Change: The summer season July and August as a case in point and we are very encouraged with the July trends that are currently trending above our expectations.

Unknown Executive: OK, and then just on the full year, your capacity is down about 14 percent, which is up a couple points, I think, from your initial expectation. Is that more a function of your ability to acquire or purchase new spare engines? Is that what's driving that?

Speaker Change: Okay, and then just on the.

Speaker Change: On a full year your capacity down about 14%, which is up a couple of points I think from from your initial expectation.

Unknown Executive: And then in terms of engine turn time? Yeah, I assume you have to get some engines back before you can actually measure the throughput or how that throughput might be changing. So when will you be in a position to measure that throughput? Maybe, just like, very simply, can you remind us how many engines you expect to get back, say in 3Q or 4Q of this year?

Speaker Change: Is that more a function of your ability to acquire or purchase.

Speaker Change: New spare engines is that is that what's driving that and then in terms of engine turn time.

Speaker Change: I assume you have to get some engines back before you can actually measure the throughput or how that throughput might be changing.

Speaker Change: So when will you be in a position to measure that throughput maybe maybe just like very simply can you remind us how many engines do you expect to get back say in <unk> or <unk> of this year.

Unknown Executive: So Duane, the plan certainly is improving a little bit versus the original plan, being the reason that turnaround times are specifically related to the work scope and the engines' needs and the availability of spare parts and materials. So, in reality, we continue forecasting an average turnaround time of 280 to 350 days, but some engines are arriving earlier because of the needs in terms of spare parts and the needs in terms of materials, okay.

Speaker Change: Duane.

The plan certainly is to.

Duane Pfennigwerth: Improving a little bit versus the original plan.

Speaker Change: Being the reason that turnaround times are specifically related to the work scope and engines need.

Speaker Change: And the availability of spare parts and materials.

Speaker Change: In reality.

Speaker Change: We continue forecasting an average turnaround time of 280 to 330 days, but some engines are arriving.

Speaker Change: <unk>.

Speaker Change: <unk>.

Speaker Change: Before because of the needs in terms of spare parts and the needs in terms of materials.

Unknown Executive: As a result of that, we were able to manage a reduction in our forecast for the last quarter, okay. Having said that, this quarter was the highest engine process, or the highest engine loss that we had during the entire period. And this is Jaime, Duane, and Adino for Enrique.

Speaker Change: As a result of that we were able to manage a reduction of our forecast for the last quarter. Okay.

Speaker Change: You said that this quarter is the highest.

Speaker Change: In June.

Speaker Change: Process or the highest engine.

Speaker Change: The loss that we had during the entire period.

Speaker Change: And this is Duane and I didn't know funding.

Unknown Executive: As part of the mitigation plan, as we mentioned in the last call, we were able to purchase additional spare engines, both for the PW1000 and the B2500, which are also included in that second half capacity adjustment favoring Molaris ASM production. But it's not only engines. I mean, we also have an extension of the delays in terms of returning the aircraft. We also have additional aircraft. So it's the entire mitigation plan that is working in our favor right now.

Speaker Change: As part of the mitigation plan as we mentioned in last call, we were able to purchase additional spare engines vote on the B W 1000.

Speaker Change: And maybe 2500, which are also included in that second half capacity NGL has been favorable in Malawi sales and production.

Speaker Change: On the engine. So I mean, we also have extension of delays.

Speaker Change: In terms of returning the aircraft we also have.

Speaker Change: Additional aircrafts so it's the entire mitigation plan, which is working in our favor right now.

Unknown Executive: Appreciate that obviously there are a lot of moving parts, but I guess just in terms of You know, so you can measure the throughput so we can measure the throughput. How many do you expect to get back in the third quarter and fourth quarter if you're willing to share that?

Speaker Change: I appreciate that obviously a lot of a lot of moving parts, but I guess just in terms of.

Speaker Change: So you can measure the throughput so we can measure the throughput how many do you expect to get back in in the third quarter and fourth quarter, if youre, if youre willing to share that.

Unknown Executive: Yes, I can share that, so we are expecting 32 engines to come back.

Speaker Change: Yes, I can share that.

Speaker Change: So we're expecting 32 inches to come back.

Unknown Executive: in the back half of this year.

Speaker Change: In the in the back half of this year.

Unknown Executive: in the second half of this year. But remember, then, what happens is engines come back, but new engines go out. So, net, you should be thinking in ASMs, not in engines back or aircraft back. Just for info, in the first half of the year, we have averaged 29 planes on the first queue and 31 planes in the second queue. And that number will probably increase to 34 or 35 during the third Q and the fourth Q of the year.

Speaker Change: In the second half of this year, but remember they wont have been seized engines going back but it <unk> go up so net net you should be thinking any major sense not even engines back on aircraft back.

Speaker Change: Youll see inflow on the first couple of the year, we have averaged 29 planes from diverse skew very one planes.

Speaker Change: In Q.

Speaker Change: And that number will increase probably to $34 35 during the third Q.

Unknown Executive: But it's a mix because whenever you get an engine, the number of cycles in order to send the engines for inspection goes up. So it's really complicated to follow by engines, and it's better just to look at it in production.

Speaker Change: The <unk> over the year.

Andy Anthony: But it's a mix because whenever you get a lending the number of cycles in order to send the engines to inspection goes so it's really complicated to followed by Andy Anthony It's better just to look at ASM production.

Unknown Executive: Okay, I appreciate that detail. Thank you.

Speaker Change: Okay I appreciate that detail. Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Stephen Trent from Citi.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from the line of Stephen Trent from Citi.

Stephen Trent: Yes, good morning, guys. And thank you very much for taking the time to answer my questions. The first, if I may add, kind of a follow-up to Duane's question, any sort of high-level view on how you think about engine supply and whether, for example, one of your Latin competitors did a perpetual power agreement with one of the lessors recently, is that something that you guys would consider? Or, you know, isn't that something that you guys going that way? Thank you.

Hi, Yes, good morning, guys and thank you very much for taking my questions.

Stephen Trent: The first if I may.

Speaker Change: At trying to have a follow up to <unk> question.

Speaker Change: Any sort of high level view on how you think about engine supply and whether for example.

Speaker Change: One of your Latin competitors.

Speaker Change: Did a perpetual power agreement with one of our lessors recently is that something that you guys would consider or.

Speaker Change: As you don't see yourselves going that way. Thank you.

Enrique Beltranena: Um, the answer is no, right now. No.

Speaker Change: The answer is no.

Speaker Change: No no. Okay, I know you will say.

Speaker Change: In the next three four months, it's going to be the case.

Enrique Beltranena: Okay. And I don't think in the next three, four months that that's going to be the case. Clearly, the problem of doing aircraft, crew, maintenance, and insurance leasing has an impact on cost first. The second thing is, if we add capacity that way, we will be diminishing the impact that we have had on trust, which has been tremendously important. So honestly, in this game plan that we are doing, we do not have that considered.

Speaker Change: Clearly the program is doing aircrafts crew maintenance and insurance Leasing's.

Speaker Change: It has an impact on cost first the second thing is we add capacity that way, we will be deteriorating the impact that we had on PRASM, which has been tremendously important. So honestly in this game plan that we are doing we do not.

Enrique Beltranena: And we consider that it would only deteriorate the pricing environment. As always, we go back, and we tell you, Steve, it's really important. We're playing here for profitability, not for market share. And in terms of engines, Steve, this is Jaime; most of the additional engines are purchased, not these engines from lessors. Remember, we have an FHA agreement with Pratt that also helps us on the cost side, on the long-term maintenance of the engines. So we believe it's a good asset to have, considering the situation that we will be experiencing over the next two and a half years.

Speaker Change: <unk> that consider and we consider that it would only be two rate the pricing environment as always we go back and we told you Steve It's really important that we're playing here for profitability and not for market share.

And in terms of <unk> and most of the additional end user purchased engines not disengage.

Speaker Change: Remember we have a.

Speaker Change: And if a trade agreement it would.

Speaker Change: That also helps us on the cost side on the long term maintenance of the engines. So we believe it's a good asset to have considering the situation that we will be experiencing over the next two and a half years.

Enrique Beltranena: Okay, really appreciate that, Enrique. Very helpful. And just one quick follow up. Curious to hear, you know, any high-level views you guys may have about servicing the Tulum airport if there's sort of anything interesting you've learned from the operations on your flights.

Speaker Change: Okay really appreciate that and regain have been very helpful and just one quick follow up.

Speaker Change: I'm curious to hear any high level views you guys may have about <unk>.

Speaker Change: Servicing that to loom airport sort of anything interesting you've learned from.

Speaker Change: The operations.

Holger Blankenstein: So, Stephen, this is Holger. We have actually not started service to Tulum yet. We have announced the launch of Guadalajara-Tulum later in the year. That is already on sale, and the booking curves are shaping up relatively well, in line with our expectations, but operations are going to start later in the fourth quarter.

Speaker Change: Youre slightly go up.

Speaker Change: Yes.

Speaker Change: So Steven this is we have actually not started service to to move yet.

Speaker Change: We have announced.

Speaker Change: The launch of Guadalajara to normal later in the year and that is already on sale.

Speaker Change: The booking curves are shaping up relatively well.

Speaker Change: In line with our expectations, but the operations are going to start.

Speaker Change: Nature.

Speaker Change: In the fourth quarter.

Speaker Change: I misheard you.

Speaker Change: Thank you Holger and I appreciate the time.

Holger Blankenstein: I misheard you. Thank you, Holger, and appreciate the time. This is the start of operations. So it's still quite a way off.

Speaker Change: There is the start of operations, so it's still quite a way off.

Holger Blankenstein: Perfect. I misheard you. I appreciate that, Holger. Thank you.

Speaker Change: Perfect I misheard you I appreciate that color. Thank you.

Operator: Thank you. One moment for the next question. Our next question comes from the line of Michael Linenberg from Deutsche Bank.

Thank you one moment far next question.

Speaker Change: Our next question comes from the line of Michael Lindenberg from Deutsche Bank.

Michael John Linenberg: Oh, hey, good morning, everyone. Holger, when you were talking about capacity for 2025 being lower than 2023, presumably, I guess it's going to be higher than 2024, but still down. When we look at the number of airplanes that are grounded, 34, 35 by the fourth quarter, third, fourth quarter this year, is that the peak? And we start seeing that come down, which will allow you to have a better capacity plan in 2024. You're still going to see the number of airplanes grounded grow into the early part of 2025.

Oh, Hey, good morning, everyone.

Michael John Linenberg: When you were talking about capacity for 2025 being lower than 2023, presumably I guess, it's going to be higher than 2024, but.

Speaker Change: Down.

Speaker Change: When we look at the number of airplanes that are grounded, 34%, 35% by the fourth quarter third and fourth quarter. This year is that the peak and we start seeing that come down which will allow you to have a better capacity plan. In 2024 are you still actually going to see the number of airplanes grounded grow.

Speaker Change: Into the early part of 2025.

Holger Blankenstein: So there's obviously a lot of uncertainty around the original equipment manufacturers, both Airbus and Pratt & Whitney. We currently expect to see the peak of aircraft on the ground in the third quarter of 2024. And then the situation is going to gradually improve. And, yes, we are going to add back capacity to the market next year. But we're not going to reach 2023 capacity levels yet, so it's going to be a gradual return to service, which allows us to cautiously add capacity to our most profitable markets and also to the U.S. market. So it's going to be a gradual return to service and cautious capacity growth.

Speaker Change: So there's obviously a lot of uncertainty around the original equipment manufacturers, both Airbus and patent Whitney. We currently expect to see the peak of aircraft on ground in the third quarter of 2024, and then the situation is going to gradually improve and yes.

Speaker Change: We are going to add back capacity into the market next year, but we're not going to reach 2023 capacity levels. Yet so it's going to be a gradual return to service, which allows us to cautiously add capacity into our most profitable markets and.

Speaker Change: And also enter into the U S market. So it's going to be a gradual return to service and cautious capacity growth.

Michael John Linenberg: Okay, great, and then just, um, you know with your revenue collection in dollars now at 45%, that feels like a high watermark. And I know that's a function of adding additional capacity to the US transborder market. How does that compare to your costs in dollars?

Speaker Change: Okay, Great and then just.

Speaker Change: With your revenue collection.

In dollars now at 45% that that feels like.

Jaime Polo: Are they sort of in that 65 to 70% range? Or so I'm just trying to get a better sense of the gap. I think that that gap is narrowing with your additional service. Thanks for taking my question.

Speaker Change: The high watermark, and I know thats, a function of adding additional capacity into the U S. Transborder market, how does that compare to your cost in dollars or they sort of in that 65, 70% range.

So I'm just.

Speaker Change: Get a better sense of that.

Speaker Change: The gap I think that that gap is narrowing.

Speaker Change: Additional service thanks for taking my question.

Enrique Beltranena: That's correct, Michael, this is Jaime. Around two-thirds of the costs are in US dollars, and right now, we're aiming to be 45% by the year end of collections, so that gap is narrowing. Right. Thank you. It is really important to say that at the level that we are, still, the peso revenue routes are more profitable than getting into more US dollar exchange rates in terms of revenue. Okay. And so I think the company is pretty; it's in a very good position to cover the cost leverage in the case of the evaluation.

That's correct Michael this is Scott.

Speaker Change: Julie.

Speaker Change: Around two third of the cost are in U S dollars.

Speaker Change: Right now we're aiming to be at.

Speaker Change: 45% by the year end collections, so that gap is narrowing.

Michael John Linenberg: Great. Thank you.

Speaker Change: There.

Speaker Change: It is really important to say that I say.

Speaker Change: Got it.

The level that we are still there.

Speaker Change #104: The peso revenue routes are more profitable than embedded.

Speaker Change: Getting into more U S dollar exchange rate in terms of revenue.

Speaker Change: Okay.

Speaker Change: So I think the company is <unk>.

Speaker Change: We've seen a very good position covering the cost lever action in case of a devaluation.

Enrique Beltranena: Very good. Thanks, Enrique.

Speaker Change #103: Very good thanks.

Enrique: Thanks Enrique.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Jao Frizzo from Goldman Sachs.

Speaker Change #100: Thank you one moment far next question.

Speaker Change: Our next question comes from the line of Zhao Frito from Goldman Sachs.

Unknown Executive: Hey, good morning, guys. Thanks for taking my question. I just have a quick question on the guidance for the third quarter. As you guys mentioned in your previous remarks, the second half of the year is only stronger, right, vis-a-vis the first half. The 32% EBITDA margin in the third quarter implies a significant deceleration from the 36-37% you guys delivered in the second quarter. So I'm just trying to understand to what factors you guys attribute this, a weaker margin environment.

Zhao Frito: Hey, good morning, guys. Thanks for taking my question I just have a quick question on the guidance for the third quarter.

Speaker Change: And you guys mentioned in your previous remarks.

Speaker Change #101: Second half of the year, you see something stronger right vis vis the first half so.

Speaker Change #105: The 32% EBITDA margin in third quarter implies a significant deceleration from the 36, 37% you'll get delivered.

Speaker Change #102: On the second quarter, so I'm just trying to understand.

Speaker Change #107: What factors you guys attribute.

Speaker Change #106: These are weaker margin environment. Thank you very much.

Speaker Change #106: So I'll start out with the revenue trend and told them then I'll pass it over to Jaime.

Unknown Executive: Thank you very much.

Jaime: So let me talk about the third quarter, specifically in the guidance. There we are optimistic about achieving the guidance. However, we anticipate ongoing volatility in the macroeconomic variables.

Holger Blankenstein: So I'll start out with the revenue trend. This is Holger, and then I'll pass it over to Jaime.

Holger Blankenstein: So let me talk about the third quarter specifically and the guidance there. We are optimistic about achieving the guidance. However, we anticipate ongoing volatility in macroeconomic variables in the second half of the year, which is influenced by the new legislative agenda of the government, proposed constitutional amendments, and the transition to the new government here in Mexico, as well as the upcoming US elections. That generates just a lot of macroeconomic noise, which is outside of our control.

Jaime: The second half of the year, which is influenced by the new legislation.

Jaime: Agenda of the of the government proposed constitutional amendment and the transition to the new government here in Mexico as well as the upcoming U S elections that generates just a lot of macroeconomic noise, which is.

Holger Blankenstein: We are, as a management team, razor sharp, sharply focused on what is in our control, which is generating a positive travel environment, good revenues, and controlling our costs. If we apply today's exchange rate to the entire quarter, we would actually be one point higher in EBITDA margin versus the guidance. So that shows you how sensitive our guidance is to, or our EBITDA is to, macroeconomic variables. I also mentioned that this quarter, the third quarter, is going to be the peak in terms of aircraft on the ground due to the Pratt & Whitney situation, and that generates additional uncertainty in our revenue situation.

Jaime: Outside of our control we are as a management team razor sharp sharply focused on what is in our control which is generating a pause.

Jaime: The disc traveling environment, good revenues and controlling our costs.

Jaime: If we apply today's exchange rate to the entire quarter, we would actually be one point higher than in EBITDA margin versus the guidance. So that shows you how sensitive our guidance is to our EBITDAR is to the macroeconomic variables I also mentioned that this quarter the third.

Speaker Change #108: Water is going to be the peak in terms of aircraft on ground due to the Pratt and Whitney situations.

Speaker Change #108: And that generates additional uncertainty.

Speaker Change #109: Into our revenue situation. However, if we look at the booking trends for July we are very happy with what we what we're seeing and the quarter is shaping up very much in line with our guidance or probably a little bit ahead of our guidance.

Holger Blankenstein: However, if we look at the booking trends for July, we are very happy with what we're seeing, and the quarter is shaping up very much in line with our guidance or probably a little bit ahead of our guidance.

Holger Blankenstein: That's it for today, guys. Thank you very much.

Speaker Change #110: That's super clear guys. Thank you very much.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Tom Fitzgerald from TD Cowan.

Speaker Change #111: Thank you one moment far next question.

Speaker Change #111: Our next question comes from the line of Tom Fitzgerald from T D Cowen.

Tom Fitzgerald: Hi, everyone. Thanks very much for the time. Um, would you mind talking about the V-Club a little bit? I believe you said it's 15% of sales. How high do you think that number could get to?

Tom Fitzgerald: Hi, everyone. Thanks, very much for the time.

Tom Fitzgerald: Would you mind, just talking about the V club a little bit I believe you said, it's 15% of sales how high could you do you think that number could get to.

Holger Blankenstein: Yeah, so we've been focusing on our ancillary revenue strategy and generating recurring revenue from customers that are repeat customers. So we're looking at programs that generate affinity for our routes and for our offering. We have a couple of programs out there.

Tom Fitzgerald: Yeah, So we've been focusing on our ancillary revenue strategy and generating recurring revenue from customers that.

Speaker Change #113: Our repeat customers. So we're looking at programs that generate affinity to our.

Speaker Change #113: To our routes into our offering we have a couple of programs out there because the most important ones which is.

Holger Blankenstein: V-Club is the most important one, which is part of the lowest fare class. So everybody that buys the lowest fare class gets a V-Club membership and then has the opportunity to buy at discounted fares for the next purchase. And that has been tremendously successful. As I mentioned during the call, we're now seeing about 15% of our segments, maybe a little bit north of that, as part of the V-Club membership purchases.

Speaker Change #113: In part of the lowest fare class so everybody that buys the lowest fare class gets a big club membership and then had the opportunity to buy a discounted fares for the next purchase and that has been tremendously successful.

Speaker Change #113: As I mentioned.

Speaker Change #113: During the call, we're now seeing about 15% of our segments.

Maybe a little bit north of that as part of the V club membership purchases.

Holger Blankenstein: And then we also have a subscription program, which is called the V-Pass, which gives you one ticket per month for a monthly subscription. So we are clearly focused on building affinity and repeat customers through these affinity programs.

Speaker Change #113: And then we also have a subscription program, which is called the <unk>, which gives you.

Speaker Change #113: One ticket per month.

Speaker Change #113: For a monthly subscription so we're clearly focused on building affinity and repeat customers through these affinity programs.

Holger Blankenstein: Thanks, that's very helpful. And then, if I may just squeeze in a follow-up, just thinking longer term, you know, we talk a lot about the emerging middle class and the market growth that you'd see if domestic trips per capita started approaching, you know, some of your country comparisons. What, what's your latest thinking on the timeline for trips per capita to get closer to Colombia or Chile? And, you know, could that be accelerated by some of the supply chain nearshoring happening in Mexico? Thanks again.

Speaker Change #114: Thanks, that's very helpful. And then if I may just squeeze in a follow up just thinking longer term.

Speaker Change #115: Talk a lot about the emerging middle class and.

Speaker Change #115: The market growth that you'd see domestic trips per capita started approaching.

Speaker Change #116: Some of your country comparisons what what's your latest thinking on the timeline for trips per capita to get closer to Colombia, Chile and then.

Speaker Change #117: Would that be accelerated.

Speaker Change #117: Some of the supply chain near shoring happening in Mexico.

Holger Blankenstein: I think that's a difficult question.

Holger Blankenstein: I think that's a difficult question to answer because it depends also on the variables in Colombia or Chile, okay? And the participation of ultra-low cost carriers in both countries is growing. So I guess their air trips per capita will be growing similarly, okay? So I think the bracket is probably going to stay pretty much, the difference between them and us is going to stay pretty much the same, but both, I mean, the three regions might be growing in the next five years.

Speaker Change #118: I think thats a difficult question to answer because it depends also on the bow River on the variables.

Speaker Change #118: In Colombia, our Chile, Okay.

And the participation of the ultra low cost carriers in both countries are growing so I guess there are.

Speaker Change #118: Trips per capita will be growing similarly, okay. So I think that bracket is probably going to stay pretty much I mean, the difference between them and us it's going to stay pretty much the same but both I mean, the three regions might might be growing in the next five years.

Speaker Change #118: Okay.

Speaker Change #118: Okay.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Jen Spies from Morgan Stanley.

Speaker Change #118: Thank you.

Speaker Change #119: One moment for our next question.

Speaker Change #120: Our next question comes from the line of Jan size from Morgan Stanley.

Jen Spies: Yes, hello, thank you for taking my question. And congrats on the good results, facing those child infiltration with the groundings. I just want to ask or reiterate what you already mentioned. Um, so it seems that you've tried them.

Jan size: Yes, Hello, Thank you for taking my question.

Speaker Change #122: And congrats on the on the.

Speaker Change #123: Good results.

Speaker Change #124: And goats.

Speaker Change #125: Filtration with the Groundings I just wanted to ask a region.

Speaker Change #126: You already mentioned.

Speaker Change #126: So it seems that your track.

Jen Spies: Guidance of 9.3 based on what you've seen in July might be conservative. And also, you prefer to be conservative on your effects and fuel assumptions given the geopolitical uncertainty. So there might potentially be upside potential for your margins, right? But beyond that, is there anything else we need to consider? I know, for example, maintenance costs. We saw that they decreased quite significantly in the second quarter after being high in the second quarter. What levels should we assume in normalization for the rest?

Speaker Change #127: Guidance of $9 three based on what you're seeing in July.

Speaker Change #127: Might be conservative.

Speaker Change #127: And also you prefer to be conservative on your <unk>.

FX and fuel assumptions, given the geopolitical uncertainty so there might be upside potentially to your to your margins right.

Speaker Change #127: But beyond that is there anything else.

Speaker Change #128: We need to consider.

Speaker Change #127: No.

Speaker Change #129: SAP will maintain its cost we saw that they decreased quite significantly.

Speaker Change #129: In the second quarter after being high in the second quarter.

Speaker Change #130: At what level should we assume a normalization there the rest of the year.

Jaime Polo: Yeah, I will tackle the first question. This is Jaime, again, talking about macros, the macros that we assume we did not get, we use for FX, the Bloomberg Crocker, and for fuel, the PLATS. Look at the current macro. I think there's an upside, as you mentioned. Also on the cost side, I think that we'll be monitoring that the entire year, as expected in the budget with additional ASMs that we produce. That's why we were able to reduce the custom in the first and the second quarter.

Speaker Change #131: Okay I will tackle the first question. This is.

Speaker Change #132: Jen is talking about with macros the macros that we assume we did not get than we used for FX the Bloomberg kroeker for fuel the platts.

Speaker Change #132: Look at that point, Michael I think there is some upside as you mentioned also on the cost side.

Speaker Change #133: We have been monitoring that.

Speaker Change #132: Yeah.

Speaker Change #134: In the budget with the addition of the latest sense.

Jaime Polo: Next quarter, it also included the benefit of ASMs, but if you look at the maintenance line, this quarter was low compared to the prior year. That's basically timing. These timing and custom will occur in the second half. We believe that the guidance that we provide for the third Q is what we expect. Obviously, if we have a better any opportunity to reduce custom, we will do it. Overall, during the year, you can expect a custom of around 5.5 for the full year.

Speaker Change #135: We produced that's why we were able to reduce the gasoline in the first and the second quarter.

Speaker Change #136: Next quarter. It also included the benefit of what a lot of if you look at the maintenance line. This quarter was low compared to the prior year.

Speaker Change #136: Basically timing those those diamond and castle will look here in the second half. So we believe that that guidance that we provide for the for the for the third Q is what we expect.

Speaker Change #136: Obviously, we have.

Speaker Change #136: A better any opportunity to reduce costs when we will do it more of a lower during the year you can expect the castle of around $5 five around for the full year.

Operator: I think it's pretty cool.

Jaime Polo: Okay, got it. That's very helpful. And, just to clarify, this might be a naive question, but how much visibility do you have on that maintenance line? And is it possible that it might deviate from what you're expecting and influence that 5.5 number you just mentioned?

Operator: Okay, it's crowded. That's very helpful.

Speaker Change #137: Okay got it that's very helpful and just I mean, this might be a naive question, but.

Operator: And just, I mean, this might be a nice question, but how much of the ability do you have on that maintainant line?

Speaker Change #138: How much visibility do you have on that maintain and fly and.

Operator: And is it possible that it might deviate from what you're expecting and influence that 5.5 number of years as mentioned? It's, I think it's, it's pretty cool because it's something that you program and you have the maintainant program on the planes. Sometimes it moves from quarter to another quarter, but overall, we don't expect a major change going down on that line. It will be timing basics.

Speaker Change #139: Is it possible that it might deviate from.

Speaker Change #138:

Speaker Change #140: From what you are expecting an influence that $5 five number you just mentioned.

Jaime Polo: I think it's predictable because it's something that you program and you have the maintenance program of the planes. Sometimes it moves from quarter to another quarter, but overall, we don't expect a major change going down on that line. It would be timing, basically.

Speaker Change #141: It's I think it's a predictable because it's something that your program and you have the maintenance program on the planes, sometimes it moves from quarter to another quarter, but overall, we don't expect a major change.

<unk> done on that like it will be timing basics.

Operator: All right, thank you. You're welcome. Thank you.

Jaime Polo: All right. Thank you.

Speaker Change #141: Got it alright, thank you.

Speaker Change #142: Youre welcome.

Operator: Excuse me, this concludes today's question and answer session. I would now like to invite Mr. Beltranena to proceed with his closing remarks. Please go ahead, sir.

Operator: Excuse me.

Speaker Change #143: Thank you.

Enrique Javier Beltranena Mejicano: This concludes today's question and answer session. I would now like to invite Mr. Beltranena to proceed with these closing remarks. Please go ahead, sir. Thank you always to our family of ambassadors, to the board of directors, to our investors, bankers, and the source and suppliers for the commitment and support. I look forward to addressing you all again on the next call. And thank you very much to everybody for participating today.

Speaker Change #144: Excuse me. This concludes today's question and answer session I would now like to invite Mr Belt Banana to proceed with his closing remarks. Please go ahead Sir.

Enrique Beltranena: Thank you, as always, to our family of ambassadors, to the Board of Directors, to our investors, bankers, resources, and suppliers for their commitment and support. I look forward to addressing you all again on the next call. And thank you very much to everybody for participating today.

Speaker Change #145: So <unk> always to our family of ambassadors to the board of directors to our investors bankers and resource and suppliers for their commitment and support I look forward to addressing you all again in the next call.

Speaker Change #146: Thank you very much to everybody for participating today.

Operator: This concludes the Volaris conference call for today. Thank you very much for your participation, and have a nice day.

Operator: This concludes the Valerio conference call for today. Thank you very much for your participation, and have a nice day. Thank you very much.

Speaker Change #147: This concludes the Valores conference call for today. Thank you very much for your participation and have a nice day.

Speaker Change #147: Okay.

Speaker Change #147: [music].

Speaker Change #148: Uh huh.