Q4 2024 Controladora Vuela Compañía de Aviación SAB de CV Earnings Call

February 24, 2025

Thank you for watching!

[music].

Speaker Change: Good morning, everyone. Thank you for standing by welcome to the layers fourth quarter and full year 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 to see that.

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

Speaker Change: Please go ahead Ricardo.

Speaker Change: Good morning, and thank you for joining the call with US is our president and CEO and recurrent banana.

Speaker Change: Our airline executive Vice President Holger, Blanketing, and our Chief Financial Officer Jaime Poles.

Speaker Change: They will be discussing the company's results.

Speaker Change: After work.

Speaker Change: We'll move on to your questions.

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.

Speaker Change: That could cause the company's results to differ materially from expectations.

Speaker Change: As described in the company's filings with the United States and Mexico C. M B P.

These statements speak only as of the day. They are made and <unk> undertakes no obligation to update or modified any forward looking statements.

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

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

Eric: Thank you very much Ricardo 'twenty 'twenty four was a remarkable year for <unk>. Despite continuous adversity from GTS engine inspections and aircraft Groundings, we generated some of our best top and bottom line results. Thanks to the work of our management team in and backfill those with posted.

Eric: The net profit each quarter and generated a full year EBITDAR margin of 36%.

Speaker Change: There are several key updates that Colgate, hi, Matt and myself, we share with you today about <unk>, the advancement of our strategy and our outlook.

Speaker Change: But first I would like to reflect on where we stood in January of last year. Following two mandatory early inspections affecting more than half of our fleet ages at.

Speaker Change: At that point, we had already secured over $1 9 million future bookings, yet we faced a more than 30% reduction in our proactive fleet.

We signed the compensation agreement with Pratt <unk> Whitney covering a significant portion of our fixed costs, but this agreement didn't cover any of their revenue loss.

Speaker Change: The southern lots of engines presented us with a critical strategic challenge how to reshape the company increased profitability protect our customers and uphold our commitment to schedule integrity, all while preserving our reputation and maintaining our experienced mechanics and pilots the middle.

Speaker Change: Asian plan that we developed at that time has proven highly effective.

Speaker Change: Throughout 2024, we narrowed the gap in our capacity reductions through straight operating leases and extensions engine purchases and operational or utilization supported by the launch of our new base itinerary.

Speaker Change: We also made a clear and deliberate decision to operate our reschedule exclusively with our pilots and fleet, ensuring the highest safety standards our top priority.

Speaker Change: Callers.

Speaker Change: We did not rely on foreign crews or not we'll always maintain aircraft guaranteeing operational reliability, while taking a disciplined approach to capacity. We remain focused on our long term vision doesn't mean sustainable shareholder value, while strengthening our position.

As the preferred airline in our core markets. This commitment is at the heart of the Polaris promise, which centers on customer preference flawless execution and our sustainability when it comes to customer preference, we stay true to our value proposition.

<unk> low fares operating in attractive and reliable schedule and providing relevant and ciliary options to enhance the travel experience.

Speaker Change: Salaries for example, now account for more than 50% of our total revenues.

Speaker Change: There is flu with 30% fewer year over year ASM in 2020 for carrying 29 5 million passengers yet maintain a stable revenue stream closing the year with $3 $1 billion in total revenue nearly.

Speaker Change: The same level of 2023, reflecting an effective commercial strategy and reliable operation.

Speaker Change: Operationally, we have achieved 99, 5% scheduled reliability and 93%.

Speaker Change: On time performance within 15 minutes for the year.

Speaker Change: We also experienced a decline in customer complaints and improvements in key commercial metrics, including unique buyers unique traveler's repeat buyers and an enhanced booking per buyer ratio overall, we achieved a net promoter score of 37, 4% significantly.

Speaker Change: Forming low cost carriers in the United States, which typically reported low single digit or EBIT negative scores.

Speaker Change: Safety performance.

Speaker Change: Errand that top 10 ranking in airline ratings 2025 list of the safest low cost carriers worldwide and being the only Latin American carrier on background.

Speaker Change: This recognition.

Speaker Change: Flex our strong safety record more than fleet operational excellence and the ability to effectively manage emergencies.

Speaker Change: From a sustainability perspective, despite the grounding of a significant portion of fuel efficient Neo fleet, we limited our fuel consumption to less than 3% increase in gallons per ASM.

Speaker Change: Themed consistent C O two emissions per our PK, even as we operated heavier aircraft and more CEO fleet.

Speaker Change: These results underscore our commitment to environmental responsibility.

Speaker Change: <unk> on their list and optimal fleet conditions as a reflection of these results. Another important initiatives. We have been recognized in the down Jones best in class in this space for the third consecutive year.

2024.

Speaker Change: Also featured a significant milestone with the arrival of aircraft from our purchase orders signed in 2017 and 2021 with an integral partners joint procurement. These.

Speaker Change: These orders are set to deliver improved fuel efficiency higher seat capacity.

Speaker Change: A fundamental they will.

Speaker Change: For our unit cost control and competitive position.

Speaker Change: Additionally, the incorporation of these aircraft into our fleet will help structurally reviews, our fleet ownership costs.

Speaker Change: To date, we have taken delivery of just 15 out of our 144 aircraft order book.

Speaker Change: 2017, and 2021 orders.

By 2030, we expect to be operating over 90% of our fleet with new technology and around 60% of which will be the FY 'twenty, one model, reflecting the strategic value of our delivery slots with variables in our airports to reduce fleet ownership costs.

Speaker Change: In the short term the industry wide supply chain remains challenged as.

Speaker Change: As we navigate the ongoing complexities our strategic focus is on harmonizing in three critical areas to uphold our commitment to maximizing return on investment. The first one is balancing on schedule engine removals anticipating inspections in GTS engine returns.

Speaker Change: We successfully completed our 2024 early inspections of Pratt <unk> Whitney engines, managing an average fleet reduction of more than 30 aircraft. Looking ahead, we anticipate the ongoing revisions to effect a significant portion of our fleet not only in 2025, but.

Speaker Change: Also in 2026 and 2027, we're proactively managing maintenance schedules to ensure that the engine inspections on our wholesale carefully planned. This approach minimizes aircraft downtime and aligns with our operational requirements, thereby sustaining fleet availability and performance.

Speaker Change: The second one is about managing new aircraft arrivals from marbles in light of OEM supply chain challenges, we have renegotiated our delivery schedule agreement with Airbus. These renegotiations strategically stivers aircraft arrivals from now through 2031.

Speaker Change: Allowing us to integrate new aircraft into our operations without overextending capacity. The third one is about optimizing haircut return some lease extensions with the revised aircraft. The livery schedule, we're conducting thorough market analysis to determine the optimal number of aircraft.

Speaker Change: Returns and lease extensions.

Speaker Change: Our objective is to maintain equilibrium between supply and demand, thereby preserving first stability and leadership in our core markets.

Speaker Change: This strategy will require elevated debt rather liberties in 2026, as we balanced capacity, but will personally create the one off cost pressure in the same year for 2025, considering the three elements I just reviewed we expect them estimated growth in available seat miles.

Speaker Change: Around 13%.

Speaker Change: Even with this growth of allowances capacity will be below that of 2023.

Speaker Change: We believe this approach aligns with our priorities of emphasizing return on investment while steadfastly defending our core markets.

Speaker Change: Finally, as we start to navigate this year, we are closely monitoring the evolving board the dynamics, while our passengers our legal travelers between Mexico and the U S.

Speaker Change: Hi Tech concerns and noise surrounding border policies and enforcement have made them more cautious in their travel decisions, particularly as the situation reaches its peak.

Speaker Change: In response to these dynamics will always has already adjusted capacity for the first half.

Speaker Change: Of the year and is modulating fares to sustained low factors, we have navigated similar challenges in the past and we believe that this is an adjustment period that will likely stabilize in the near term our experience agility and discipline will help us to grow in an evolving landscape.

Holger: With that I will turn the call over to Holger to discuss our operational and commercial performance.

Holger: Good morning, everyone.

Holger: Polaris achieved robust commercial results for the full year of 2024, including a PRASM of $9.24 up 10% year over year.

Holger: This result was driven by record until risk per passenger of $55.

Holger: Rose, 15%, well outpacing our average based care, which grew 5%.

Non fair revenues are now driving almost 52% of our topline reflecting steady diversification of our revenue.

Holger: And tighter integration of our ancillary programs on capacity Polaris experienced a significant system wide capacity decrease in 2024 with a full year down 13%.

Holger: Domestic capacity was significantly impacted declining by 22% in 2024.

Holger: Although it is projected to increase in 2025, it will remain around 10% below 2023 levels.

Holger: Mexico to the U S is the strongest performing region for Polaris with a 16% growth in 2024 and rational growth projected into 2025.

Holger: Other regions like Mexico to Central America, and Central America to the U S.

Holger: And intra Central America were highly volatile through much of 2024.

Holger: We are seeing good yield following rationalize capacity and are monitoring the central American market for additional opportunities.

Holger: Importantly, we now continue to evolve our network in 2024, we optimized slot availability at Mexico City International Airport.

Holger: And strategically shifted capacity from the domestic market to the U S market following Mexico's category one upgrade.

Holger: At the end of 2024 about 40% of our capacity was in the international market.

Holger: We recently launched new routes for sale covering core domestic cities as well as routes to California and Texas.

Holger: We remain focused on flying in profitable markets and continue to leverage our entire network.

Holger: For the quarter, our <unk> were down only 5% versus the fourth quarter of 2023.

Which included the first groundings of GTS related aircrafts.

Holger: We delivered an outstanding scheduled during the peak holiday season, despite severe weather in Chicago and Tijuana.

Holger: Registering at 99, 2% scheduled completion.

Holger: On time performance within 15 minutes for the 82, 2%.

Holger: Up nearly eight percentage points from last year, and the fourth quarter, we restarted growth of our presence in COBOL Iris markets of Guadalajara, and Tijuana with additional frequencies in those profitable markets.

Holger: We also improved connectivity between our core markets and the city of Monterey during the quarter, we started to observe changes in booking conditions. Following the United States presidential elections, which we believe is driven by the incoming administrations migration and protectionist rhetoric.

Holger: We adjusted fares accordingly, sustaining strong loads.

Holger: Our total load factor for the fourth quarter was 87, 3% down just 0.8 percentage points compared to the prior year.

Holger: With our domestic and international load factors in line with last year's results.

Holger: Given the.

Holger: Acceleration in base fares are overall traveling of nine <unk>.

Holger: Came in weaker than expected. However, this result was bolstered significantly by ancillary sales, which were a record $57 per passenger for the quarter.

Holger: Hemans trading strong execution.

Holger: Of our U LCC model.

Holger: As you know around 40% of our route network faces no air competition.

Holger: And on those routes, we compete solely against buses.

Holger: Bus switching remains integral to our core strategy and will continue to be a key focus however customers are no longer choosing Polaris based.

Holger: Only on our low fares.

Holger: They are actively engaging with our digital platforms, joining our affinity programs and strengthening their loyalty.

Holger: With each repeated purchase.

Holger: Capturing and capitalizing on this recurring demand is essential to differentiating our business.

Holger: In 2025, Polaris will introduce several significant innovations to enhance our ancillary strategy as.

As we have previously shared we are planning to bundle our four core ancillary offerings.

Holger: So a single affinity portfolio to drive greater ancillary penetration.

Holger: And value for our customers.

Holger: These affinity programs have demonstrated strong momentum.

Holger: Annual pass.

Holger: <unk> grew 68% year over year in 2024.

Holger: The path solidified its position as an innovative subscription model.

Holger: The club membership expanded to $1 3 million active members and now represents one of the most important loyalty programs in the region.

Holger: Our co branded credit card now has almost 1 million active cardholders.

Holger: All in all we.

Holger: We now have a significant amount of customers in our affinity programs.

Holger: An important building block to generating more recurring revenue streams and increased purchasing frequency of our passengers. We believe our affinity programs will solidify Polaris as a leader for value seeking passengers Inc.

Holger: Including frequent fliers corporates and small and medium businesses. In addition to our VFR and leisure base.

Holger: In tandem we are upgrading your boss.

Holger: Our dedicated vacation business.

Holger: To have similarly broader appeal to higher ticket packages.

Holger: To further enhance customer experience, while ours is preparing to launch a new mobile app in the coming weeks reinforcing our commitment to digital innovation and customer engagement.

Holger: The new App will significantly improve the customer experience streamline personalized bookings boarding access to affinity programs and self service.

Holger: Built with the latest advancements in software development it provides greater flexibility to adapt to future updates.

Holger: Overall <unk> continues to enhance its distribution strategy, increasing the share of direct digital channel sales across our website mobile app call centers and airport sales.

Holger: In 2024, we launched our Codeshare agreement with Frontier and launched a new code share with Iberia Airlines.

Holger: The Codeshare with frontier now accounts for approximately two percentage points of our cross border load factors.

Holger: Polaris will continue exploring further opportunities on alliances without sacrificing the core of our LTC model.

Holger: Turning now to our commercial outlook for 2025.

Holger: And then we can noted we have adjusted base fares in the first quarter in response to softness in U S. VFR traffic, which we believe is influenced by geopolitical uncertainty.

Holger: We expect that this is a temporary market condition and we will continue monitoring demand patterns closely just as we did at the start of the first Trump administration.

Holger: The first quarter of this year will face a challenging year over year comparison due to exceptional results in the first quarter of 2024, when substantial capacity came out of the Mexican domestic market due to Pratt <unk> Whitney engine inspections.

Holger: And the Boeing Max nine groundings.

Holger: We expect to return to our usual first quarter seasonality, followed by a stronger second half additions.

Holger: Additionally, the shift of Easter into the second quarter with further impact our results.

Holger: Now I will turn the call over to Jaime to walk through our fourth quarter and full year financial results.

Jaime: Thank you Holger.

Jaime: Our full year 2024 financial results.

Jaime: Demonstrated the effective execution of our GTS engine inspections mitigation plan.

Jaime: And the resiliency of our business, we focus on controlling cost in 2024, while increasing profitability.

Jaime: For the year.

Jaime: We achieved 13% EBIT margin and 36% EBITA margin.

Jaime: Deliver on $126 million net profit.

Jaime: We reduced our net debt to EBITDA ratio to two six times.

Jaime: <unk> generated over 300 million in operating cash flow.

Jaime: And grew our year ending liquidity position to $954 million.

Jaime: Despite temporary cost pressures associated with adding inspections, we maintain one of the lowest CASM X fuel globally.

Jaime: At the beginning of the year, one of our capacity reduction scenarios predicted an 18% decrease in ASM year over year.

Jaime: However, the actual reduction was 13%.

Jaime: <unk> five percentage point improvement due to our fleet mitigation plan.

Jaime: I will talk more about the steps, we're taking to right similar outcomes in 2025.

Jaime: But first let me walk through the results for the fourth quarter and full year 2024.

Jaime: Compared to the same period last year, our fourth quarter 2024 results were as follows.

Jaime: Total operating revenues were 835, million% to 7% decline, giving fewer yourselves and software unit revenues attributable to the factors already described.

Jaime: Top line results were also impacted by the 20% depreciation of the Mexican peso against the U S dollar.

Jaime: We continue to manage our FX exposure by targeting collection of approximately 50% in U S dollars.

Jaime: Moving onto costs CASM increased by 3% to eight points here for a while.

Jaime: For CASM ex fuel rose by 17% to 568 cents.

Jaime: Meanwhile, our average economic fuel cost dropped 20% to two $551 per gallon.

Jaime: Additionally, we saw cost benefits from the weaker peso.

Jaime: Unit costs remain under temporary pressure due to rounding.

Jaime: Number of maintain as events and re delivery expense.

Jaime: We expect delivery of accruals and related maintenance will impact 2025, with a one time cost of approximately $100 million.

Jaime: This will result in an estimated zero point present impact on CASM ex fuel during the year.

Jaime: I want to highlight that as strongly we're relations continue to differentiate Polaris for many global Airlines.

Jaime: We executed a revised three year contract with our labor Union that content place annual salary and benefit increases that keep pace with natural inflation in Mexican peso.

Jaime: Returning to the P&L for.

Jaime: For the fourth quarter in the other operating income line, we booked sale and leaseback gains of $13 6 million related to the delivery of four aircrafts.

Jaime: A reminder, this line also includes circa of rounding compensation from breadth and width.

Jaime: EBIT for the quarter totaled $117 million down, 29%, even software Union revenue and a tough compression to our record quarter leave it of $164 million in the fourth quarter of 2023.

Jaime: EBIT margin was 14% down four two percentage points.

Jaime: And why is.

Jaime: EBITA came in at $331 million.

Jaime: This represented an 18% increase.

Jaime: EBITDA margin was 39, 6% or eight percentage points higher and in line with wireless.

Jaime: Finally, net income was 46 million profit translate into earnings per avs or <unk> 46.

Jaime: Moving briefly to our P&L for the full year 2024, compared to 2023 total operating income revenues were $3 1 billion only a 4% decrease despite golar is flying 13% pure ASM during the year CASM was eight points year with three 3%.

Jaime: Increased with average economic fuel cost falling by 12% to $2 75 per gallon gasoline ex fuel was $5 40.

Jaime: 12% higher.

Jaime: EBIT was $413 million.

Jaime: From 223 million with an EBIT margin of 13, 2% or six percentage points higher.

EBITDAR totaled $1 1 billion or 39% increase with our full year EBITDA margin of 36, 3% an increase of 11 percentage points and also in line with guidance.

Jaime: Net income was $126 million compared to one 8 million profit.

Jaime: This translated into $1 <unk>.

Jaime: Turning now to cash flow and balance sheet data for the fourth quarter cash flow provided by operating activities was 308 million our highest ever quarterly generation.

Jaime: Cash outflows used in investing and financing activities were 85 million and $98 million respectively.

Jaime: Meanwhile, our capex, excluding finance fleet pre delivery payments totaled $160 million for the quarter and $350 million for the full year.

Jaime: Capex was driven by spring and purchases and maintenance.

Our experienced supplier in good shape heading into 2025.

Jaime: We expect Capex, excluding finance pvp towards down by around 100 million for this year as we don't expect to buy more engines.

Jaime: Polaris and then 2024 with a total liquidity position of $954 million compared to $789 million at 2023.

Jaime: This figure represented 30% of 2020 for total operating revenues.

Jaime: As of December 31.

Jaime: Our net debt to EBITDA ratio stood at two six times compared to three three times at the end of 2023.

Jaime: From our balance sheet perspective, Polaris maintains a willis structural debt profile that supports both financial stability and long term growth.

Jaime: Our total debt stands at $3 9 billion, primarily composed of lease liabilities and credit lines strategically allocated for aging and fleet requirements.

Jaime: Within the destructor financial debit totals $800 million, including $320 million in lending and financing and $361 million in PDP financial needs reinforcing our disciplined approach to fleet modernization and operational resilience.

Jaime: Very secure around $300 million, new PDP credit lines guaranteed contractual aircraft deliveries until 2028.

Jaime: This reflects lenders confidence in our long term business. Despite the near term challenges we have place.

Jaime: As of December 31, our total fleet consisted of 142 aircraft.

Jaime: From 149, a year ago with an average age of six four years.

Jaime: We incorporated six aircraft into our fleet during the quarter.

Jaime: Now I would like to provide albeit on patent Whitney due to Indian inspections, we had an average of 34 aircraft on ground during the fourth quarter and 32 aircraft on ground during full year 2024.

Jaime: In 2025, our capacity growth will be driven by new deliveries and by the increase of our productive fleet as engines returned from the shops importantly, as these engines are being incorporated these road will not add new debt to our balance sheets looking ahead.

Jaime: We have renegotiated our delivery schedule with Airbus more evenly distributing and postponing aircraft deliveries to conclude in 2031.

Jaime: Factoring in aircraft deliveries returns extensions and the return of expected engines. We project that these newest caito, we support a rationale ASM growth from 2025 to 2031.

Jaime: All of the engine inspections and repairs are program will be completed during 2023 and 2024 comply with their worthiness directive regarding further meta. Nevertheless, some of these engines will require a second shop visit in the next 18 to 24 months to install for life parts.

Jaime: Finally, turning to guidance on our outlook for the full year and first quarter of 2025, we want to comment that since mid January we have seen weakness in VFR demand for travel between the U S and Mexico.

Jaime: We assume this will be a short term headwind as Mexico and the U S. Negotiate a resolution to this issue surround the board. However, we're currently hearing titanate concerns from our passenger as they try to understand the new immigration on travel controls that will be implemented by the new administration.

Speaker Change: <unk> in the U S.

Speaker Change: For the full year 2025, we currently expect an EBITA margin of 34% to 36%.

Speaker Change: <unk> growth of around 30%, which is at the lower end of our previous guidance range.

Speaker Change: This is labor reduction.

Speaker Change: Also a result of recent discussions we have had with variables on potential delivery delays and with pattern with me on the return to service of engines.

Speaker Change: We're also seeing this is light lower ASM growth is appropriate given the weakness in cross border there'll be four demand I mentioned.

Speaker Change: We will continue to work with both Airbus on pricing decisions and we will closely monitor demand patterns and may have to make further adjustments to the network as the year progresses.

It is also important to say that we remain positive about the course of the bilateral relationship which means there could be upside to our full year guidance.

Speaker Change: We expect Capex net of financed fleet per delivery payments of around $250 million Capex will primarily encompass maintaining our regulatory expense.

Speaker Change: Our full year 2025 outlook assumes an average foreign exchange rate of 21 to $21.

Speaker Change: To Mexican pesos per U S. Dollar. We also assume an average U S Gulf coast jet fuel price of $2 15 to $2 $25 per gallon.

Speaker Change: Moving on to our first quarter 2025 guidance note that it reflects several factors, including the shift of Easter back into the second quarter. The continued weakened peso.

Speaker Change: Our return to historical first quarter seasonal demand.

Speaker Change: For the first quarter, we're expecting ASM growth of around 7%.

Speaker Change: So between 79 and <unk> <unk>.

Speaker Change: Given by softer U S to Mexico demand.

Speaker Change: Given the more the issue, resulting from the new U S administration noted above.

Speaker Change: And our CASM ex fuel to be in the range of five five to $5 six.

Speaker Change: In all we expect the first quarter EBITDA margin of around 28% to 29%.

Speaker Change: First quarter 2025 outlook assumes an average foreign exchange rate of 26 to 28 Mexican pesos per U S dollar and an average U S Gulf coast jet fuel price of $2 25 to $35 per gallon.

Speaker Change: In closing two years ago, we committed to doubling revenues EBITDAR and free cash flow by 2025 compared to 2019.

<unk> vision of expected headwinds associated with engine inspections, and Airbus delays I want to reaffirm this commitment which demonstrates our strong focus on both profitability and cash generation now I will turn the call back over to Enrique for closing remarks.

Enrique: Thank you Jaime.

Enrique: For the past 18 months key United Airlines leaders have speculated about the survival of the low cost carrier business model.

Enrique: I want to emphasize.

<unk> position as an ultra low cost carrier in Mexico is unique.

Enrique: As the largest airline in Mexico by passenger volume.

Enrique: We enjoy a robust domestic market share and ultra low cost carriers represent over 70% of the passenger domestic market and we both hold a cost leadership over the legacy carriers.

Enrique: Moreover, Mexico distinct ability to convert bus passengers are recurrent travelers has driven growth in the countries emerging air travel market in the last 15 years, we continue to see plenty of runway for this secular trends, having said that we believe there are some clouds in the U S leaders by law.

Enrique: So fees about what makes a superior model airline.

Enrique: We agree that strategic evolution and operational changes to keep up with industry trends do not happen overnight you have heard us for several years breach rational and prudent capacity growth.

Enrique: We agree that the health and profitability of the industry are dependent on rational capacity deployment, we have emphasized this principle.

Enrique: We enhanced our focus on profitable growth for our business.

Enrique: We agree that airlines should operate where they have a competitive advantage Polaris has built a strong network in markets, where we are the leading early lastly, we agreed up cost convergence threatens U S carriers that were built to compete primarily with price.

Enrique: But <unk> is highly differentiated in that.

Enrique: We can compete both.

Enrique: With low fares and high value, we offer loafers, we operate an attractive and reliable schedule, but we provide relevant ancillary options that enhance the travel experience.

Thank you very much for leasing mean, operator, please open the line for questions.

Enrique: Thank you the floor is now open for questions. If you have a question. Please dial star one on your phone at any time if at any point. Your question is answered.

Enrique: Move yourself from the queue by pressing star one again questions will be taken in the order that they are received.

Enrique: That when you post your questions you pick up your handset to bite off.

Enrique: <unk> sound quality.

Enrique: Following the presentation via the webcast may post their questions on the platform.

Enrique: Management team will answer them during this call or the Polaris Investor Relations team will follow up after the conference call is finished to send a question via the webcast platform click.

Enrique: Ask a question button and type your enquiry. Please hold while we poll for questions.

Unknown Operator: And our first question is going to come from the line of Michael Lindenberg with Deutsche Bank. Your line is open. Please go ahead.

Speaker Change: Oh, Hey, good morning, everyone.

Michael Lindenberg: I have a few here I want to get back to your guide for March quarter, RASM down 15% year over year, I know you called out some softness.

Speaker Change: U S to Mexico VFR traffic I'm curious are you seeing a bigger impact from U S originated or Mexican Mexican originating and as part of that question.

Unknown Operator: How much of it also includes FX, which I know is down 17% year over year is there a stage length component and is there an Easter effect. So it seems like theres, maybe multiple elements that are actually impacting that RASM guide.

Holder: Hello, Michael This is holder so let me pay hunger.

Unknown Operator: What we're seeing in the transporter market.

Holder: Basically since the U S elections in November.

Unknown Operator: And we have seen.

A reduction of traffic and willingness to travel in both sides, both the U S and the Mexican side.

Unknown Operator: In our VFR segment.

Unknown Operator: However, it's very important to note that the high seasons Christmas.

Unknown Operator: The first part of January the Easter high season.

Were quite robust, but the bookings were quite robust at Easter outlook looks pretty healthy despite all the noise and.

Unknown Operator: In the trans border relationship.

Unknown Operator: Yeah.

Unknown Operator: In January kind of mid January towards the inauguration of the Trump administration and in the early weeks of February we saw that trend continue however, I would say towards the end of February we have seen a marked improvement.

Unknown Operator: Willingness to travel in the transporter market.

Unknown Operator: That's where we are right now and.

Unknown Operator: And.

Unknown Operator: We continue to see obviously, our base share pressure in the domestic market by FX.

Unknown Operator: And.

Unknown Operator: Maybe a slight reduction of leisure traffic to the U S.

Unknown Operator: Given the 20% peso devaluation because it just makes traveled to the U S and vacationing in the U S. Just so much more expensive.

Speaker Change: Okay. Okay. That's helpful and then as.

Unknown Operator: As I think about.

Unknown Operator: The.

Unknown Operator: This is jaime the $13 6 million debt gains that you took on sale leasebacks.

Unknown Operator: When we think about the cash inflow as a result of those transactions is that similar in magnitude or is it is it meaningfully different.

Speaker Change: Just trying to reconcile both the P&L versus the cash flow impact and thanks for taking my questions.

Michael Lindenberg: Hello, Michael did you chime in.

Speaker Change: It corresponds to six aircrafts. So it is the stand or a sale and leaseback spare aircraft, which is going to be around $3 million and remember when you compare versus 2023. The main difference will be in the viable lease expenses. So in the last year, we took a bad debt of around 33 five.

Michael Lindenberg: Median.

Michael Lindenberg: Related to the extensions that we took to protect.

Michael Lindenberg: The capacity in 'twenty, four and 'twenty five.

Michael Lindenberg: Okay. Thank you very much.

Unknown Operator: Thank you one moment as we move onto our next question.

Michael Lindenberg: Yeah.

Michael Lindenberg: Our next question comes from the line of Duane <unk> with Evercore ISI. Your line is open. Please go ahead.

Duane: Hey, Thanks, good morning.

Duane: Wonder if you could put a finer point on the Easter shift impact I know that.

Duane: A pretty meaningful variable for you. So could you quantify that in terms of RASM percentage points or margin percentage points.

Duane: In the first quarter, and then relative I know, it's early but relative to the year over year RASM decline that you've guided to in the first quarter do you have any early thoughts on the shape of that into the June quarter.

Duane: Yes.

Latest Holder: Hello, Duane this is latest holder again.

Latest Holder: So I can tell you that the Easter season bookings still look quite solid and obviously that accounts for.

Latest Holder: The Easter currently is in April so obviously the traveling decline we're seeing the first quarter is.

Latest Holder: Mostly driven by that.

Latest Holder: And the FX change that we observed versus last year.

Latest Holder: Overall.

Latest Holder: We don't break out guidance of traveling for the full year, but for the June quarter, but what I can tell you that we're currently expecting.

Latest Holder: Single digit mid single digit decline of traveling for the full year in U S dollar denominated terms.

Speaker Change: Okay. That's helpful.

Speaker Change: And then maybe could you give us some sense for you've guided.

Speaker Change: Specifically for CASM ex in the first quarter, but I don't believe you have for the year. So maybe you could expand on your thoughts of the shape of that CASM BR.

Speaker Change: Beyond the first quarter.

Scott: Hi, Randy This is Scott I think it should be of the same level of these F. 'twenty 'twenty four notwithstanding.

The first quarter number.

Speaker Change: Got it Okay, and then just lastly.

Speaker Change: The Pratt impacted aircraft I know, you've been working to offset delays with engine purchases and lease extensions.

Speaker Change: But can you can you speak to the throughput you are seeing on the impacted engines again.

Speaker Change: Isolating for the.

Speaker Change: <unk> is that you have how are you seeing throughput changing.

Speaker Change: And then hi.

Speaker Change: Any high level thoughts on the compensation that might be running through the P&L year over year.

Speaker Change: 2025, thanks, Thank you for taking the questions.

Speaker Change: So the first the first answer is.

Speaker Change: The whole throughput.

Speaker Change: Engines depends on several things so let me break it down.

Speaker Change: The first one is unexpected removals, which during the last quarter of last year were higher I mean, we were expecting somewhere around two to three unexpected removals, we went up to six okay. The second thing.

Speaker Change: About <unk>.

Speaker Change: Inducting engines into the Rio maintenance line.

Speaker Change: Because it's not just about sending the engineers to the shops, but it is about really induction about that.

Speaker Change: <unk> induction have been really well during the whole year, but then in December we saw.

Speaker Change: The reduction of those reductions we did catch up in January and February has been kind of slow and then the third element is about what happens in the line of maintenance and there are three or four steps in that line of maintenance in the second part of it depends heavily on.

Speaker Change: On maintenance spare parts.

Speaker Change: And materials.

Speaker Change: Need for it and we have seen in January and February is slow move on that and the LNG is being.

Speaker Change: Kind of retarded, because so that net net it's b during 2024 at Westwood chaos.

Speaker Change: The last three months December January and February were seeing much slower move than what we saw during the full year last year speaking about compensation I will pass it over to Jaime.

Speaker Change: Duane.

Speaker Change: So think about a compensation based on the base.

Speaker Change: Based on aircraft on ground last year, we have 32 aircraft on ground. This year with information we have today, we expect to have steady is going to be substantially similar.

Speaker Change: In order for you to model.

Speaker Change: Thank you for the detailed thoughts.

Youre welcome Blake. Thank you one moment our next question.

Speaker Change: Our next question is going to be from the line of Tom Fitzgerald with TD Cowen. Your line is open. Please go ahead.

Tom Fitzgerald: Okay. Thanks, so much for the time.

Tom Fitzgerald: Just a question on the aircraft ownership costs.

Tom Fitzgerald: Is that.

Tom Fitzgerald: <unk> number.

Tom Fitzgerald: <unk> in the fourth quarter is that a good run rate to use for 2025.

Tom Fitzgerald: Yeah.

Tom Fitzgerald: It will be Shire Tom.

Tom Fitzgerald: And we can follow up for you to work on the model with the IR team.

Unknown Operator: Okay. Okay. That's helpful and then I guess.

Tom Fitzgerald: I know it should be a tailwind for you guys longer term right.

Tom Fitzgerald: As you start to take on more aircrafts from the Indigo order book.

Tom Fitzgerald: Remind us how we should think about that over the over the longer term in 2006 and 2011. Thanks again.

Tom Fitzgerald: Colorectal and remember Doug right now she is last year why are you getting hitting the right of use because of the rounding. So the FX now going forward that will remain this year.

Speaker Change: Next year on a similar level, but after that we are not incorporating fleet. We are acquiring new fleet, what they put in place our own route into productive so that should really benefit.

Tom Fitzgerald: Matching cost without need to.

Speaker Change: To deleverage the company.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Thank you and when you move on to our next question.

Speaker Change: Our next question comes from the line of Jason with Citi. Your line is open. Please go ahead.

Speaker Change: Yeah.

Speaker Change: Mr. <unk> your phone might be on mute.

Speaker Change: Hello can you hear me now.

Speaker Change: Yes, Sir.

Speaker Change: Yeah, Okay cool.

Speaker Change: When we think of Blessed as high free cash flow yields do you have any view on it.

Speaker Change: Long term capital deployment once we get past the GTS.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: We are reducing capex this year long term.

Speaker Change: I see you are charging notices we have legal limitations to do any buyback or dividend currently but that number has substantially reduced.

Speaker Change: In down from $148 million at the end of 2023, so only minus 22, so in the future. It will be a strategic tool that we may be able to use.

Speaker Change: Okay awesome.

Unknown Operator: Follow up question I have is have you noticed any hiccups in remittances from the U S.

Speaker Change: Okay.

No we haven't.

Speaker Change: Sure.

Speaker Change: You've seen any reductions in remittances right now, it's probably too early to say how the full year is going to pan out.

Speaker Change: The only thing we are noticing is certain hesitancy to travel in the cross border market.

Speaker Change: In the low seasons not in the Hiseq.

Speaker Change: Yeah.

Speaker Change: Thank you so much.

Speaker Change: Thank you and one moment.

Speaker Change: Question.

Speaker Change: And our next question comes from the line of Jens Spiess with Morgan Stanley. Your line is open. Please go ahead.

Jens Spiess: Yes, Hello, I just want to clarify one one prior answer you gave on the CASM.

Jens Spiess: Hi, Matt.

Speaker Change: You mentioned that.

Speaker Change: You expect it to be similar.

Speaker Change: Last year.

Speaker Change: But your guidance for the first quarter is lower than what you had last year, so that would mean that.

Speaker Change: From the second quarter to the fourth quarter CASM would be.

Speaker Change: Higher actually than what you had on average 224 is that correct.

Speaker Change: Understanding that correctly, if you will.

Look at full year gasoline was in 2020 Wilcox CASM X at five four.

Speaker Change: That number should be similar to years, because we are growing.

Okay.

Speaker Change: Okay.

Speaker Change: Your guidance is five five to $5 six right.

Speaker Change: That's for.

Speaker Change: For the first Q not for the full year.

Speaker Change: Exactly and Oh, sorry.

Speaker Change: Sorry, maybe I was looking at the numbers I thought you had five seven last Oh, yes, yes, you are right correct I understand that correctly.

Speaker Change: Thank you.

Speaker Change: Yeah, that's clear thank you I understand that alright.

Speaker Change: So for just.

Speaker Change: A follow up on on the aircraft on ground.

Speaker Change: I know you like to guide through <unk>.

Speaker Change: And I appreciate that color, but just in terms of number of aircraft I was curious of the progression. How are you seeing I don't know how many aircraft do you expect to have.

Speaker Change: On ground by by midyear or by the end of this year and maybe also if you could give a bit more.

Speaker Change: Numbers there for 'twenty 'twenty six 'twenty seven would be very much appreciate it. Thank you.

Speaker Change: I think generally chart too early to tell what's going to happen on 'twenty six 'twenty seven or beyond for this year with information we have with flat.

Speaker Change: It's around 30 aircrafts average.

Speaker Change: Youre going to see a higher number in this quarter probably around that at all and we will update this number on a quarterly basis, because things are really changing from time to time and we expect that that number of around 30 should remain also in 2026.

Speaker Change: Alright, 26, Okay alright.

Thank you.

Speaker Change: Thank you one moment as we move on to our next question.

Speaker Change: And our next question comes from the line of Ross <unk> with UBS. Your line is open. Please go ahead.

Ross: Thank you for taking my question.

Ross: Could you give more color on costs, mainly on salaries and lately.

Ross: Salaries, so that would be growth year over year and fourth quarter.

Ross: And looking at the third quarter that was a decrease year over year and also variable leases increased on a quarter over quarter basis.

Ross: I would like to note that was caused by the addition of Dr. Chris. Thank you.

Ross: I think in terms of the salaries and benefit their own flattish. The number is greenfield due to the FX because although the salaries are in vessels and that the main driving all this.

Ross: Of the number.

Ross: And also we have an impact on the revenue profit sharing that by lower need to provide that we will get on the <unk> of last year.

Ross: Okay.

Ross: Okay. Thank you.

Ross: Okay.

Ross: Thank you.

Speaker Change: This concludes today's question and answer session and I would like to invite Mr. Beltran Ian to proceed with his closing remarks. Please go ahead Sir.

Ross: Thank you very much operator.

Beltran Ian: 'twenty 'twenty four it was a difficult, but very rewarding year, you can expect us to maintain our discipline throughout 2025.

Beltran Ian: We'll keep our heads down do the word navigate the near term turbulence.

Beltran Ian: Certain of our markets, while staying very focused on the long term continuing to build the world class Walter a low cost carrier earlier I would like to extend a sincere. Thank you to our family of ambassadors to the board of directors to investors the bankers, the lessors and suppliers for their commitment.

Beltran Ian: <unk> 2024, I look forward to working with you all in 2025.

Beltran Ian: Im looking forward to keep volume.

Speaker Change: Doing the best we can with this tremendous team we have and we'll speak to you again for you on our first quarterly late April. Thank you very much operator, and thanks for everything.

Unknown Operator: This concludes <unk> conference call for today. Thank you very much for your participation and have a great day.

Unknown Operator: Okay.