Q3 2024 Controladora Vuela Compañía de Aviación SAB de CV Earnings Call
[music].
Good morning, everyone. Thank you for standing by welcome to Polaris third quarter 2024 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. Please note that we are recording this event. This event is.
Also being broadcast live via webcast and can be accessed through Polaris website.
Speaker Change: At this point I would like to turn the call over to Rodrigo Martinez Investor Relations director.
Speaker Change: Please go ahead Ricardo.
Rodrigo Martinez: Good morning, and thank you for joining the call.
Speaker Change: With us is our president and CEO and recurrent angina.
Speaker Change: Our airline executive Vice President Holger Blankstein.
Speaker Change: And our Chief financial Officer hiding a box.
Speaker Change: They will be discussing the company's third quarter 'twenty 'twenty four results.
Speaker Change: After work, we will move on to your questions.
Speaker Change: Please note that this call is for investors and analysts only.
Speaker Change: Before we begin.
Speaker Change: 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 results to differ materially from expectations.
Speaker Change: As described in the company's filings with the United States S E T and Mexico's C and D V.
These statements speak only as of the date. 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 third quarter of 2023, unless otherwise noted.
Speaker Change: And with that I will turn the call over to Eric.
Eric: Good morning, and thank you for joining US where are these third quarter results demonstrate our business model resilience and commitment to execution.
Eric: Oh, two reported Polaris has delivered strong operational and financial results again, marking this our fourth consecutive quarter of net income, while providing great ultra low cost carrier service value to our customers.
Eric: We have strategically streamlined the company during this period.
Eric: Effectively reducing operations by about a quarter of our fleet during our busiest summer season due to the Pratt <unk> Whitney engine inspections.
Eric: Our team also effectively mitigated external disruptions like weather related events without materially.
Eric: Despite these challenges we managed to contain our reduction in ASM to only 11% during the last 12 months compared to the 2023 levels.
Eric: So we achieved total operating revenue of $3 $2 billion in this period matching the full year operating revenues of 2023, an impressive accomplishment.
Eric: We're moving forward to the other side of this engine inspection spirit paving the way for sustained shareholder value creation, our most important long term object.
Eric: As part of this process as.
Eric: We are emerging as the preferred airline in our core markets.
Eric: We offer loafers fly attractive schedules broadly and reliably.
Eric: And provide relevant ancillary areas that add value to our customers.
Eric: We also deliver on day of departures itineraries and provide digital solutions to our customers.
Eric: A proven safety and security required.
Eric: As the engine inspections began 12 months ago I am today pleased to highlight key achievements from this last 12 months.
Eric: First reductions in rpms were consistently lower than those EMEA Sims, indicating a well calibrated approach to capacity demand Michigan.
Eric: This allows us to sustain similar load factor levels and protect the demand elasticity of our boss switching passengers ultimately improving our T rise.
Eric: Second we further unbundle, our fares keeping base fares at 2019 levels, while increasing awareness senior revenues as a percentage of total operating revenues from 34% in 2019% to 51% over the past 12 months.
Eric: This is our business model working to perfection and we are committed to continuing to couple low unstable fares with honest value added services.
Eric: Third our net promoter score reached 34%, reflecting improving customer recovery and satisfaction significant reduction in mishandled bags better on time performance reduced complains and materially lower involuntary denied boardings underscored this improvement.
Eric: Fourth our nippur redesigned effectively address the challenges of grounded aircraft and enabled an 11% increase in ASM in the U S transborder market versus 2023.
Eric: We achieved a remarkable system scheduled completion rate of 98, 5%, while controlling our costs. Despite the aging fleet and grounded aircraft due to N genius pictures, a crucial element of the strategy, we're sustaining ambassador brewer DVT and labor costs.
Eric: And fifth we implemented a fleet mitigation plan that did not increase that leverage ensuring we could pursue future capacity additions without jeopardizing market pricing and future aircraft leasing costs.
Eric: Our financial performance over the last 12 months speaks for itself.
Eric: Our profitability has significantly improved with an EBIT margin of 14% and EBITDAR margin of 34% and a net margin of 6%. We achieved these results by ensuring that the vast proportion of our rep work remains profitable generating strong unit revenues.
Eric: An attractive rebuild customers who value our low price.
Eric: This contrasts us favor I believe with the United States Ultra low cost carrier environment and highlights our ability to execute transformative changes swiftly quite maintaining cost control.
Eric: Notably around half of our routes compete exclusively against the bus market, allowing us to continue bringing in new flyers without creating excessive capacity growth in key ultra low cost carrier markets.
Eric: While our operating cost structure remains under control with most costs being variable we have experienced reduced operating leverage due to aircraft groundings and increased maintenance and readily very expenses due to our fleet's aging.
Eric: Both effects are temporary and will not impose structural cost pressures.
Eric: Our CASM X fuel was 5.2 cents during the last 12 months keeping those among the three lowest publicly listed operators worldwide.
We believe that it is not experiencing a cost convergence with full service carriers that could structurally reduce our margins going forward.
Eric: On the balance sheet, our net debt to EBITDAR ratio improved from three five times in the third quarter of 2023 to two seven times in the third quarter of 2024.
Eric: One of the lowest levels in Polaris history. This.
Eric: This was despite the significant investments we had to make to implement the mitigation plan for the engine inspections, we outlined a year ago.
Eric: Total cash, including short term investments stands at $833 million, an improvement of $66 million from the third quarter of 2023.
Eric: On our third quarter of 2023 call a year ago. Despite the engine crisis, whether it is management made a commitment to our passengers ambassadors and investors we take quote.
Eric: We will do our best to respond to the challenge turn on their taken mitigation plan to manage the variables we could control.
Regarding our aircraft on ground. This challenge has already improved spread them with the en valores gain clarity on how to address the situation and we continue to coordinate closely with them.
Eric: The induction slots are within the agreed forecast spare parts and materials have been that plant as we induct engines into the inspection processes and we have planned turnaround times together with broad based on a low medium and high maintenance needs.
Eric: In all we're seeing an important improvement in turnaround times. However, the situation remains a royalty.
Eric: And knowledge that the market may have valid and recent level capacity concerns for next year is this currently on their inspection return earlier than expected.
Eric: Wherever I want to assure you that we will not deploy excess capacity beyond what the emerging markets typically grow and cannot store we.
Eric: We have a structural flexibility that allows us to prioritize profitability over market share.
Eric: These include options, such as reducing spare engines, minimizing Pratt <unk> whitney's emergency lease engines and accelerating the return of aircraft among other measures.
Eric: We have a plan.
Eric: Today I can affirm that we havent just overcome challenges we have evolved as a company we strongly feel that our reliable performance during crisis, along with evidence that we have been disciplined in the execution of our plan makes us a good asset and separate.
Eric: To us from our peers as you know this is consistent with what you know about with Larry's, a seasoned and stable management team.
Speaker Change: Polaris is position as an ultra low cost carrier in Mexico is distinct from that of ultra low cost carriers in the United States.
Speaker Change: The largest airline in Mexico by passenger volume, we enjoy a robust domestic market share and cost leadership over the legacy carriers. Moreover, Mexico has unique ability to convert bus passengers had recurring travelers has driven growth in the countries emerging air travel market in the last 15 years we.
Speaker Change: Continue to see plenty of runway for this secular trend.
Speaker Change: Finally, considering there was uncertainty surrounding recent constitutional reforms I would like to highlight that Mexico's new presses and Claudia Shimbun has pledged to protect investors right. She took office on the October 1st becoming the country's first female either let me quote sure I see.
Claudia Sheinbaum: These very clear be assured that investments of national and foreign shareholders will be safe in our country.
Speaker Change: With that I will now turn the call over to Kroger to discuss commercial and operating performance for the quarter.
Speaker Change: You Enrique and good morning, everyone.
Speaker Change: Demand remains strong across our markets during the high season in the summer underscored by a 90% domestic load factor up one seven percentage points and an 83.4 international load factor up one percentage point year over year.
Speaker Change: And five percentage points sequentially as our Mexico U S additional capacity matured.
Speaker Change: Our total load factor was a strong 87, 4% a one percentage point increase.
Speaker Change: These load factors supported our record third quarter <unk> of nine point 38 cents at 12% increase.
Speaker Change: Our average load factor of $53 up 9% and ancillary per Pax.
Speaker Change: At $54 up 10%.
Speaker Change: Remaining robust and consistent with the healthy demand we have observed during the year.
Speaker Change: Asm's contracted 14% in line with our guidance.
Speaker Change: And we had a remarkable on time performance within 15 minutes of 84, 3%.
Speaker Change: With on time departures rising almost seven percentage points over our performance in the third quarter of last year.
Speaker Change: Even with the schedule impacts of Pratt and Whitney engines, we have diligently managed accommodations leading to a much lower volume of customer complaints. This is highlighted by an increased net promoter score currently at 37%.
Speaker Change: During the quarter, we continue to capitalize on strong market trends in the domestic and Transborder segments.
Speaker Change: In our domestic market, we continue to see growing demand from first time and repeat fliers.
Speaker Change: Driving consistent strengths and loads fares and ancillary revenues.
Speaker Change: Turning to our international markets approximately 40% of our total <unk> are currently in this market.
Speaker Change: Our plan is to shift more capacity to the U S. Mexico transporter market, taking full advantage of Mexico's return to cat one status.
Speaker Change: We have announced new routes and inaugurated several including Guadalajara to loan while are harder to San Jose Costa Rica, Miami to El Salvador Tijuana to Las Vegas.
Speaker Change: In line with our midterm growth strategy, we have launched our first south bound leisure routes from Oakland to Cabo and Mac Alan to Cancun.
Speaker Change: This marks our first step in expanding our offerings as we leverage our widening cost advantage over North American U S. He sees and legacy Airlines.
Speaker Change: Additionally, we are increasing capacity from our core domestic and international stations and connecting capacity to Monterrey.
Speaker Change: In Central America, and South America, we have reduced.
Speaker Change: The number of aircraft allocated to these markets from nine a year ago to six due to our lack of aircraft availability contributing to more normalized competitive trends in those markets.
Speaker Change: Over the summer we saw a pickup in demand response and strong margins in our transport market.
Speaker Change: Beyond the commercial upside we expect the greater concentration of our network in the United States to provide a critical financial advantage.
Speaker Change: We expect the structurally higher traveling in.
Speaker Change: Increased U S dollar collections.
Speaker Change: And longer sectors to provide a long term tailwind to our margin mix.
Speaker Change: On the ancillary side non ticket revenue as a potential total revenue remained strong and stable at 50%.
We continue to innovate and enhance our non air ancillary focusing on customization and promotion strategies. For example, we are consolidating our most relevant offerings, our <unk> membership program.
Speaker Change: POS monthly subscription annual pass.
Speaker Change: And index co branded credit card into a single affinity portfolio.
Speaker Change: This offering leverages the penetration of our credit card with 1 million active cardholders and our V Club program, which has also surpassed 1 million active members.
Speaker Change: Turning to marketing alliances.
Speaker Change: <unk> now participate in two international co chairs, our Codeshare with Frontier Airlines has ramped up effectively and we anticipate it will have an increasing contribution to our full year EBIT.
Speaker Change: Additionally, we launched a new codeshare with Iberia Airlines in June providing a small yet valuable opportunity to connect their passengers to the Mexican market without adding complexity to our business model.
Speaker Change: Turning to our outlook for the rest of the year booking trends continued to show strength throughout the fall and holiday season, We expect total revenue for the full year 2024 to be close to 2023, even with a double digit reduction in capacity.
Speaker Change: I want to elaborate on and weakest comment about focusing on profitable markets and how well our stands out from ultra low cost carriers in the United States.
Speaker Change: Over the past decade, we have grown rapidly to become Mexico's leading airline and transported passengers.
Speaker Change: With our well known brand and established New network, we use our leadership to drive profitability.
Speaker Change: Domestically, we can keep fair stable and attract more customers, especially those switching from buses and price sensitive leisure passengers.
Speaker Change: Internationally, we now have a balanced network between Mexico and the U S.
Speaker Change: With return of F. A a category one status a year ago.
Speaker Change: We now can allocate capacity based on profitability in any of our markets.
Speaker Change: In the past being in category two limited our growth in the United States and led to an oversupply in the domestic market.
In the U S Cross border markets, where we expect travel to grow in the next decade due to near shoring, we could offer low prices, that's United States competitors can't match.
Speaker Change: We also saw strong VFR markets benefiting from large Hispanic communities.
Speaker Change: That know the Polaris brand.
Speaker Change: As we drive preference and loyalty among these communities, we expect to realize benefits from higher margin repeat and international flying.
Speaker Change: Overall, the capacity outlook for 2025 is expected to be in the low to mid teens. However, we expect capacity to return to 2023 levels by the second half of 2025.
Speaker Change: We will remain prudent.
Speaker Change: And rationale as we introduce capacity back into the market.
Speaker Change: Now I will turn the call over to Jaime to walk through our third quarter financial results.
Jaime: Thank you Roger.
Jaime: Our third quarter results reflect the strong demand complemented by strict cost control and more favorable jet fuel prices.
Speaker Change: This discipline, resulting in our four consecutive quarter of expanding margins and positive bottom line. Despite the challenges faced during the year.
Speaker Change: Compared to the same period last year, our third quarter 2024 results, whereas follows.
Speaker Change: Total operating revenues were 813 million, just a 4% decrease despite a 14% reduction in capacity.
Speaker Change: Our net results were also affected by the 11% appreciation of the Mexican peso against the U S dollar.
Speaker Change: While this trend benefits our unit costs.
Speaker Change: Is a headwind to our unit revenue negatively impacting our margins.
Speaker Change: Given that approximately 60% of our operating expenses are denominated in U S dollars.
Speaker Change: We have targeted 50% of our collections to wean dollars to mitigate our exposure to these dynamics.
Speaker Change: Additionally, around 90% of our cash balance is held in U S dollars.
Back to the P&L.
Speaker Change: Total gasoline decreased 1% to seven point.
Speaker Change: 92 cents.
Speaker Change: Average economic fuel cost decreased by 17% to $2 $64 per gallon, while CASM ex fuel came in at 539 cents better than guidance for a 10% increase despite strong headwinds from the results show me a sense.
Speaker Change: This underscores our focus on cost control and give us a competitive advantage in dangerous.
Speaker Change: We reinforce these advantaged by implementing aggressive cost management avoiding expensive with leases.
Speaker Change: And maintaining an efficient cost structure with approximately 70% of our costs being viable and semi fix in fact compared to our United States peers, we anticipate that our cost gap will continue to widen over time in the cross border market.
Our financial differentiation is clear and growing.
Speaker Change: Despite the Eog's and related cost complexities that began last September we have maintained one of the lowest unit cost in the war.
Speaker Change: With this strong quarter results, we expect to be at the top quartile for operating margins on a rolling 12 month basis.
Speaker Change: Returning to results in the quarter, we only book sale and leaseback gains of $2 2 million in the other operating income line related to the delivery of one eight week 20 Neil.
Speaker Change: Note that are Fred rounding compensation from patent with this also including in this line.
Speaker Change: EBIT totaled $126 million, an increase of four 100% compared to 39 million in the third quarter of 2023.
Speaker Change: For an EBIT margin of 15, 5% up 11 percentage points EBIT.
Speaker Change: EBITDAR was $315 million, a 52% increase and the highest quarterly level in the history of Polaris. The EBITA margin reached 38, 7%, a 14 percentage point improvement.
Speaker Change: As a reminder, both EBIT and EBITDAR include the platinum winning compensation as well as expenses from leases of the entire fleet included the grounded aircraft associated with engine inspections.
Speaker Change: Net income was 37 million compared to a net loss of 39 million in the third quarter of 2023 translating to earnings per avs of 32 sets.
Speaker Change: Cash flow provided by operating activities in the third quarter was 233 million cash.
Speaker Change: Cash outflows using investing in financing activities were 149 million and 54 million respectively.
Speaker Change: Meanwhile, our third quarter Capex exclusive finance pre delivery payments total $54 million. These investments include the acquisition of spare engines, which are crucial for maintaining business continuity and mitigating disruption to our core operations.
Speaker Change: Malarious ended the quarter with a total liquidity position of $830 million, representing 26% over the last 12 months total operating revenues.
Speaker Change: As of September 30th our net debt to EBITDA ratio are all work to two seven times from three five times at the end of the third quarter of 2023, and two nine times at the end of the last partner.
Speaker Change: I want to emphasize that we have been consistently deleveraging for the past seven quarters.
Speaker Change: Reflecting our commitment to profitability and disciplined approach to capital allocation.
Speaker Change: Moreover, we expect to continue deleveraging throughout the fourth quarter finish in 'twenty 'twenty four around 245 times equally important we have no significant near or medium term debt maturities.
Speaker Change: Moving briefly to our P&L for the first nine months of 2024 compared to the same period of 2023.
Speaker Change: Total operating revenues were $2 3 billion.
Speaker Change: A 2% decrease despite flying 15% fewer is sent over that timed gas.
Speaker Change: Gasoline was eight point show two cents, just a 3% increase as average economic fuel cost fell by 9% to $2 $83 per gallon gas.
Speaker Change: CASM ex fuel was five point 30 cents, 11% higher despite the strong headwinds from the reduction in a sense.
Speaker Change: If it was $296 million up from 58 million for the first nine months of 2023, and EBIT margin was 12, 8% up 10 percentage points.
Speaker Change: EBITDA totaled $810 million, a 50% increase with an EBITA margin of 35, 1% up 12 percentage points.
Speaker Change: Net income was 81 million profit versus 104 million loss for the Euro will prevail.
Speaker Change: Translating into earnings per Avs of 70 cents. This was our best result in the first nine months since 2021.
Speaker Change: As of September 30th our fleet consisted of 137 aircraft up from 125, a year ago with an average age of six three years.
Speaker Change: Due to the engine inspections, we had an average of 34 aircraft on ground during the third quarter.
Speaker Change: We received one eight through 20, Neil during the quarter for a total of six new aircraft year to date from our order book with Airbus.
Speaker Change: Earlier in the year. We also received two 820 seals on the straight operating leases as part of our mitigation plan for the engine inspections.
Speaker Change: Clothing is returns extensions and the return of productive aircrafts, we target an average of low to mid teens annual capacity growth for the next few years.
Speaker Change: In line with our expectations our Capex.
Speaker Change: Excluding finance pre delivery payments total 234 million for the first nine months of 2024.
Speaker Change: As a final note on capital allocation this quarter, we expanded one of our pre delivery payment facilities.
Speaker Change: <unk> now has finance pdp's that cover our expected deliveries.
Speaker Change: Through 2027.
Speaker Change: Before concluding my remarks, I will address our world data guidance.
Speaker Change: While our overall outlook for the year remains unchanged.
Speaker Change: We're pleased to once again raise our full year EBITA margin as we continued to exceed expectation and expect to benefit from more favorable jet fuel prices for the remainder of the year.
Speaker Change: For the fourth quarter 2024, we are expecting and ASM reduction of approximately 7% year over year.
<unk> of around nine six cents.
Speaker Change: Awesome ex fuel of approximately five five cents and an EBITA margin of around 39%.
Speaker Change: Our fourth quarter 2024 outlook assumes an average foreign exchange rate of 23 to 25 Mexican pesos per U S. Dollar.
Speaker Change: And an average U S Gulf Coast jet fuel price of two point to two to $3 per gallon.
Based on our fourth quarter guidance, we now anticipate our full year ASM reduction of approximately 13% year over year compared to our previous guidance of 14% decline.
Speaker Change: Additionally, we are raising our full year EBITDA margin forecast to around 36% up from our prior range of 32% to 34%.
Speaker Change: Lastly, we continue to project Capex net of finance pre delivery payments to be approximately $400 million.
Speaker Change: On a final note we took advantage of the declining jet fuel prices in September by securing tactical hedges for the high season months of November 2024 through January 2025.
Speaker Change: We have hedged approximately 30% of our projected fuel consumption for the spear usually nation call options linked to Gulf Coast jet fuel with an average strike price of two point $25 per gallon to.
Speaker Change: To be clear is this spot Gulf coast jet fuel goes above $225 per gallon, we get the benefit of the hedge but if it goes down we capture the full downside net of the premiums paid in September now.
Speaker Change: Now I will turn the call back over to Enrique for closing remarks.
Thank you Jaime.
Before we begin Q&A I want to call attention to Polaris integrated annual report for 2023.
Speaker Change: Which were recently published on our Investor website.
Speaker Change: Last year, we navigated numerous headwinds, including the government mandated slug reductions of Mexico City International Airport, the prolonged category second boundary and the onset of the GTS engine inspections, we financially overcame these challenges and maintain our commitment to.
Speaker Change: Our ambassadors passengers communities investors and the environment meeting the best corporate governance practices.
Speaker Change: I will not discuss our corporate sustainability strategy is deaf on this call I would like to note that multiple stakeholders have recognized our platform and sustainable practices in business in aviation and how this airport has uniquely created value I invite you to review our integrated annual report.
Board to learn more about what larry's initiatives for corporate development climate protection and long term sustainability.
Speaker Change: Thank you very much for listening operator, please open the line for questions.
Speaker Change: Certainly ladies and gentlemen, if you do have a question at this time. Please press star one on your telephone. If your question has been answered and you'd like to remove yourself from the queue simply press Star. One again. Our first question comes from the line of Duane <unk> from Evercore ISI. Your question. Please.
Speaker Change: Hi, Thank you good morning.
Speaker Change: Can you can you help us think about the shape of capacity.
Speaker Change: To the first quarter and in the first half of 2025.
Speaker Change: Given us a preliminary view on the year.
Speaker Change: But I wonder if you could speak to how you expect maybe to start the year from growth perspective in the first quarter.
Speaker Change: Thanks for your question. So we are finalizing our operating plan, but.
Speaker Change: We're looking at growth in the in the mid teens for the first half.
Speaker Change: 2025.
Speaker Change: Approximately and Thats still a little bit under discussion depending on the situation at Pratt <unk> Whitney.
Speaker Change: And Airbus.
Speaker Change: Okay.
Speaker Change: That would be a reasonable assumption for the first quarter.
Speaker Change: Yes that would be a reasonable assumption and.
Speaker Change: Yes.
Speaker Change: Okay, and then with respect to the New administration I know, it's only been a few weeks here, but any early view on how the relationship may be changing any any new policies you care to highlight.
Speaker Change: Yes.
Kevin: Duane this is Kevin.
Speaker Change: To be honest with you we have met recently the new authorities.
Speaker Change: And we expect to a certain extent some continuity on the aviation policies.
Speaker Change: Is it the same parties basically having the government.
Speaker Change: We have.
Speaker Change: Stablish.
Close communications and interactions with the new authority.
Speaker Change: We are conveying.
Speaker Change: The need to continue promoting the healthy development of this sector.
Speaker Change: We have secured the level playing field among all industry participants.
Speaker Change: Strengthen and modernize regulators.
Speaker Change: We think we can facilitate access access to competitive inputs.
Speaker Change: And finally.
Speaker Change: Consolidate the Mexico City Metropolitan airports system among other priorities.
Speaker Change: Those are the topics that we have in nowhere agenda with the conversations that we have with the recent government.
Speaker Change: And this is what we expect.
Okay I know it's early so I appreciate the thoughts thank you.
Speaker Change: Thank you.
Speaker Change: Our next question.
Speaker Change: Comes from the line of Mendez.
Speaker Change: From Jpmorgan your question please.
Speaker Change: Hey, good morning, guys and thanks for taking my question can you.
Speaker Change: Help us think about the recent FX depreciation in Mexico, the ability that the company might have.
Speaker Change: To pass it through into interferes any hate you one follow up on your comments about the new administration.
Speaker Change: You mentioned about the Mexico City hub any deals it's the slot restrictions could change anytime soon thank you.
Speaker Change: Hello, Julien This is <unk> I will answer for the question on FX, and then I'll pass it over to Enrique for the political questions.
Speaker Change: Opex dilemma, you'll notice as we increase the network to the U S and the growth market, we are in and out on a 41% collections in in U S. In U S dollars. Our goal is to increase that to 50% and the additional win burst 90% of our cash balance in U S dollars, we have a natural hedge.
Speaker Change: Based on on on the company since our cost expenses, 60%.
Speaker Change: So.
We are basically not only hedging the FX impact on our business.
I'll pass it over to rich This is America.
Speaker Change: Donna.
Speaker Change: Speaking about the reactions of the new world.
Speaker Change: In terms of the Metropolitan airports, what we saw yesterday in a meeting that we had with the under secretary of transportation is.
Speaker Change: Is that generally in charge offs.
Speaker Change: Agency.
Speaker Change: Regulation.
Speaker Change: There are a lot of pressures in terms of changing the slots.
Speaker Change: And the number of slots in Mexico CCM.
Speaker Change: It's going to happen.
Speaker Change: And the second thing the key stated.
Speaker Change: Is that they expect to continue doing what they have done during the last six years in terms of number of slots in the way they are managing the system, except for the discussion of the new regulations that has been.
Speaker Change: These costs.
Okay.
Speaker Change: Probably going to be approved in the following months of modern apps.
Speaker Change: Okay very clear both thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Stephen Trent from Citi. Your question. Please.
Stephen Trent: Good morning, gentlemen, and thanks very much for taking my question.
Stephen Trent: Sort of a follow up first off.
Speaker Change: I think you said.
Speaker Change: 50% of our collections of 90% of cash balances are in U S dollars.
Speaker Change: We think about.
Speaker Change: What those numbers might look like long term.
Speaker Change: Or you think they stay around that level or maybe possibly tilt further charts of the dollar.
Speaker Change: Hello, Steve.
Speaker Change: Today, we are a 41% collection in U S dollars, we aim to increase that to 50% next year based on the network that we are planning to grow into the international markets.
Speaker Change: We keep to maintain when does the morning always above 90 percentage resolved.
Speaker Change: Perfect I hadn't heard you correctly I appreciate the clarification.
Speaker Change: And just a quick follow up question.
Speaker Change: I definitely appreciate half of that Ross your share of our bus routes.
Speaker Change: With the cross border growth.
Speaker Change: Some of the future growth could come from international bus routes in places that you serve.
Speaker Change: Alan for example.
Speaker Change: Stephen This is hugger.
Currently already operate many routes that are niche routes that operate into the U S.
Think about Guadalajara renal for example, which is a route that is a VFR niche routes that passengers typically used to Boston previously and now fly with us and we continue to see opportunities in our VFR core in the U S.
Speaker Change: Mobile law, we have star.
Speaker Change: <unk> started two routes in the south bound leisure segments, where American tourists go to the Mexican beach destinations.
Speaker Change: And that is a major opportunity going forward as we grow the company.
Speaker Change: Oh, great. Thanks, very much guys.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Thomas Fitzgerald from TD Cowen Your question. Please.
Thomas Fitzgerald: Thanks, very much can you help us think about the other operating income line in 2025 do you think it will be lower than it is in 'twenty four.
Speaker Change: Hi, this is kind of it to us it will be a little lower because we expect this year as you know we are around 34 aircrafts average during the full year round two engine inspections doesn't own virtual goes out to 30 31. So.
Thomas Fitzgerald: So that line, we will have a.
Thomas Fitzgerald: Similar percentage downgrade of next year.
Speaker Change: Okay. Thanks, guys. That's really helpful. And then would you mind, just giving some color on how our bookings and bearings are looking for.
Speaker Change: For early 'twenty, 'twenty, five and some of the U S and Mexico routes that you've been discussing thanks again for the time.
Speaker Change: So this is hugger.
Speaker Change: We're looking at a pretty solid bookings into the fourth quarter as we approached the high season in November and December.
Speaker Change: Typically we see a strong performance in the cross border market.
Speaker Change: In our in our VFR core market.
Speaker Change: So we see healthy fare environment healthy demand demand environment in those markets.
Speaker Change: <unk>.
Speaker Change: Well, we believe that this trend is going to continue into the first quarter 2025.
Speaker Change: Additional capacity that we added into the transporter market earlier in the year.
Speaker Change: Is maturing well.
Speaker Change: We saw good results in the summer season and.
Speaker Change: That capacity is coming to maturity in the fourth quarter 2024.
Speaker Change: Thank you our next call.
Speaker Change: She comes from the line of raw material.
Speaker Change: <unk> from Bank of America. Your question. Please.
Speaker Change: Yes.
Speaker Change: Hi, guys. Thanks for the opportunity.
Speaker Change: Gratulation on their results I have a couple here.
First one is what were the main surprises.
Speaker Change: <unk> is the company has guided our margin.
Speaker Change: Last quarter, but delivered a higher margin than previously thought.
Speaker Change: Do you judge those items are sustainable going forward.
Speaker Change: The first one.
Speaker Change: And the second if you could give us.
Speaker Change: To date.
Speaker Change: Was any change.
Speaker Change: In terms of expectations for Brexit the agent recalls.
Speaker Change: Anything you could share you could share here would be would be useful. Thank you very much.
Speaker Change: Hi, this is <unk>.
Speaker Change: On your first answer I think the Sop prices.
Speaker Change: The fuel price.
Speaker Change: And better traction.
Speaker Change: That will be positive.
And can you repeat the second question. Please.
Speaker Change: Sure no worries. Thank you very much.
Speaker Change: Do you see any changes on Brett on the weekend the engine recall expected timing.
Speaker Change: If all of the information you provided last quarter, if all of those remain or if there was any change on.
Speaker Change: How you are seeing.
Speaker Change: Timing is hard.
Speaker Change: For the edge of the recalls.
Kevin: Roger This is Kevin.
Speaker Change: We have seen.
Speaker Change: Good progress.
Speaker Change: The overall timing drilling inductions and turnarounds at the shops has been.
Speaker Change: A significant reduction I would say from 350 days previously.
Speaker Change: But now closer than than two or 300 days.
Speaker Change: Currently we have I would say its strong pipeline with multiple engines undergoing various stages of maintenance.
Speaker Change: Several more set to enter the process before year end also.
Speaker Change: And all these interactions are concerned with materials and spare parts ready for reserves.
Speaker Change: As a result, the outlook for Orange and Red deliveries over the next six months.
Speaker Change: Looking very solid in a reliable and.
Speaker Change: Very very comparable with what capacity will be stating for the first semester of mid year. Once we finish our operating plan and our budget process towards 2020 to price.
Speaker Change: Perfect. Thanks very much.
Speaker Change: Thank you and our next question comes from the line of Jen Spiess from Morgan Stanley. Your question. Please.
Jen Spiess: Yes. Thank you so I have a question on the profitability of international.
Speaker Change: Your entrance on the routes versus domestic.
Speaker Change:
If I understood you correctly S S.
Speaker Change: Capacity returns you will be prioritizing international routes and assuming the peso stays around the current level.
Speaker Change: Like on average.
Speaker Change: How is the profitability of those international routes versus domestic currently.
Speaker Change: And also could you please clarify.
Speaker Change: I didn't get the the hedging for how long have you hedged 30% of your.
Speaker Change: Of your fuel needs.
Speaker Change: Thank you.
Speaker Change: So on the route profitability Mystic there'd be internationally, we typically don't break that down.
Speaker Change: But we can tell you that growth is going to be rather balanced next year between domestic and international.
Speaker Change: Alright.
Speaker Change: Scott and me on the hedge question was what we hedge is was 30% of the Consumptions of the months of November December of this year in January of next year with Asian goals with a strike price of $2 25.
Speaker Change: Okay perfect. So basically in the next three months and.
Speaker Change: Yeah.
Speaker Change:
Speaker Change: Okay perfect at.
Speaker Change: At the same price right 2.5, alright.
Speaker Change: If I may this is Enrique will trend then again.
Speaker Change: Knowledge, very well youre concerned about deploying capacity in the future.
Speaker Change: Combining capacity returning from Brett <unk> with me on the additional capacity from <unk>, new deliveries, but I want to reiterate that we will make decisions based on profitability not market share and we will remain prudent and rationale as we reintroduce the capacity to the market.
Speaker Change: Okay.
Speaker Change: Perfect very clear and if I may just just one follow up you mentioned that you expect to.
Speaker Change:
Speaker Change: To continue with a mix of international versus domestic as you redeploy capacity, but then how will you race.
Speaker Change: Our revenue mix from 41% to 50%, that's what I am struggling to square.
Speaker Change: Okay.
Speaker Change: So it's going to be.
Speaker Change: Due to a maturing of the routes that we added to this year the capacity that we added this year to to the U S market to the transporter market.
Speaker Change: <unk>.
Speaker Change: Additional frequencies and routes and destinations that were going to open next year into the U S.
Speaker Change: Also one important point to mention is that the ancillary is on the international market typically.
Speaker Change: Somewhat higher than domestic net also drives and improved performance.
Speaker Change: Okay perfect. Thank you.
Speaker Change: Yes.
Speaker Change: Thank you and our next question comes from the line of Michael Lindenberg from Deutsche Bank. Your question. Please.
Speaker Change: Yeah, Hey.
Speaker Change: Jaime.
Speaker Change: I know you answered.
Michael Lindenberg: A question for 2025 as it relates to the other operating line fourth quarter should we assume roughly 34 airplanes on the ground.
Speaker Change: Yeah, I think for the fourth quarter is better than the third we expect to have around 32 aircrafts average.
Speaker Change: On the ground.
Michael Lindenberg: No Michael.
Speaker Change: Michael deadline is basically got compensation year to date, we have only wouk sale and leaseback gains for $18 million.
And then sort of related to that I know last year a lot of times. The fourth quarter is usually a time when we see airline decide to extend leases and so in some cases, we do get a credit in the re delivery line I know, we had that last year in the fourth quarter is there.
Speaker Change: Is there going to be something impacting the fourth quarter. This year with respect to the re delivery line could that actually be a credit rather.
Speaker Change: Or a reversal I guess is maybe the way I am.
Speaker Change: Thanks, Ed.
Michael Lindenberg: Michael We did all of the extension of 2025.
In the fourth quarter of last year and the first Q of this year. So when you compare 'twenty three 'twenty four youre going to see that notice so.
Michael Lindenberg: Well Lisa Lindsay in line will be on the historical level without any one off.
Speaker Change: Okay, Great and then just one quick last one just the whole group.
Speaker Change: And some of these new markets, where you're targeting leisure customers and yet when I look at the cities.
Speaker Change: There is still may actually be surprisingly a VFR component there.
Speaker Change: Is it possible that some of these new southbound market split rather than being 100% leisure could it be something more like 80 515.
Speaker Change: Your thoughts on that thank you.
Michael Lindenberg: Michael Absolutely, obviously, we're going to target markets, where we already have a presence and there is going to be a mix of customer profiles absolute.
Speaker Change: Very good thank you.
Speaker Change: Excuse me. This concludes today's question and answer session I would now like to invite Mr. Belts to proceed with his closing remarks. Please go ahead Sir.
Speaker Change: Thank you very much operator.
Thank you very much to everybody listening this call.
Speaker Change: So I want to thank you to our family of ambassadors, obviously to our board of directors and new investors bankers lessors and suppliers for your commitment and support.
Speaker Change: Really look forward to addressing you all again for our full year earnings in the short period.
Speaker Change: Thank you very much and I wish you a Merry Christmas.
Speaker Change: This.
Speaker Change: <unk> conference call for today. Thank you very much for your participation and have a nice day.
Speaker Change: Okay.
Speaker Change: Okay.