Q2 2025 Controladora Vuela Compañía de Aviación SAB de CV Earnings Call
Good morning everyone, thank you for standing by, welcome to Volaris second quarter, 2025 Financial results conference call Alliance are in listen. Only mode following the company's presentation, we will open a 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 the Volaris website at this point. I would like to turn the call over to Ricardo Martinez. Investor relations director. Please, go ahead Ricardo.
Good morning, and thank you for joining the call.
Enrique Venta: With us. It's our president and CEO Enrique Venta.
Speaker Change: Our Airline Executive Vice President, holder Blanca St.
Enrique Venta: And our Chief Financial Officer him post.
Enrique Venta: They will be discussing the company's second quarter to 2025 results.
Enrique Venta: After work, we will move on to your questions.
Enrique Venta: 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, Securities laws.
Enrique Venta: Forward-looking statements are subject to several factors that could cause the company results to differ materially from expectations.
Enrique Venta: As described in the company.
Enrique Venta: Filing with the United States, SEC, and Mexico cnbv.
Enrique Venta: This statement speak only as of the day they are made and marries undertakes. No obligation to update or modify any forward-looking statement.
As in our earnings pre-release, our numbers are in US dollars compared to the second quarter of 2024. Unless otherwise noted
Enrique Venta: and with that, I will turn the call over to Enrique.
Enrique Venta: Good morning everyone and thank you for joining us.
If there is 1 message, I want to leave you with today is that various has proven its resilience time and again and we are well positioned to keep doing. So yes, this is a challenging industry and we're not immune to external headwinds but we stay focused on what we can control we adapt quickly and execute with discipline. We believe there is a
Enrique Venta: Significant opportunity ahead and remain confident in our ability to deliver value for shareholders.
Enrique Venta: We delivered second quarter results, slightly ahead of our guidance achieving a 28%, debit our margin, which we expect will again ranks near the top of the North American airline industry.
Enrique Venta: Throughout the quarter, we took advantage of our flexible business model and took decisive, the actions to capitalize on the Manda cross our Network.
Enrique Venta: Coupled with tactical capacity adjustments through the quarter.
Enrique Venta: We delivered T razmos C. 7.8 cents ahead of our forecasted range and ciliary revenue per passenger reached 54 remaining in resilient with limited price elasticity and serving as a key contributor to total revenue.
Enrique Venta: On what we can control particularly maintaining cost efficiency gas. Excuse remain contained at 569 cents despite lower capacity growth than initially planned.
Enrique Venta: The quarter started on a softer, demand note. So we prioritize sustaining low factors through the man stimulation. However, as we saw signs of demand sequential improving by mid quarter, we shifted gears to maximize margin performance.
Enrique Venta: In the domestic Market as some initial fears around tariffs, and its economic pressures. Easy. We turn our Focus to yields and strategically capturing higher first for possibly.
Enrique Venta: While hesitancy to travel remained on us routes. We took advantage of fare elasticity among Travelers willing to book close to the portion.
Enrique Venta: While International low factors moderated, as we prioritize yield expansion domestic low, factors recovered to 88%, by quarter end.
Enrique Venta: This drove a total second quarter low factor of 82%.
Reason demand Trends have been constructive and we see potential for cross border traffic to recover 1's. Volatility is yes.
Let me provide additional context during the quarter is conducted sentiment service among passengers on both sides of the Border. We found that the significant portion of Travelers, had mainly posted travel plans, due to fears of deteriorating economic conditions, possibly linked to immigration rhetoric.
Enrique Venta: In response, we Implement a several initiatives, including increased flexibility the option to defer airport, fee payments, until checking among others.
Enrique Venta: It is worth noting that 75% of respondents ultimately intend to fly again within the next 6 months suggesting that underlying demand remains positive into the future.
Enrique Venta: Looking ahead, we want to reiterate that our capacity decisions will continue to be anchored in 2 guider, priorities customer demand and sustained profitability.
Enrique Venta: While US immigration uncertainties may continue to influence the Mandate in the near near term. We see this as a manageable medium-term Factor.
Enrique Venta: Despite this an ongoing industry, why do Em's constraints and microeconomic conditions? We continue growing aligned with market trends.
And currently.
Demand for the second half of the year is shaping up to be stronger than the first half and is tracking in line with historical patterns.
Enrique Venta: With improved visibility. We are reinstating our full year, every dark margin guidance. Now, expecting a range of 32 to 33%
Enrique Venta: This Outlook is supported by fundamental drivers pointing to sequential Improvement in the second half of 2025.
Enrique Venta: I want to emphasize that regardless of external conditions politics has consistently deliver results in line with guidance over many consecutive quarters.
Enrique Venta: Looking ahead to 2026 in light of the current macroeconomic environment. We are embedding additional flexibility into our Fleet plan position in bolaris to grow asms in the mid single digits in line with emerging market dynamics.
Our agile approach to managing the productive Fleet enables capacity adjustments of about 3% touch points in either direction, allowing us to respond to demand Trends while maintaining margin disciplines.
Speaker Change: I will now turn the call over to holder to continue to discuss our second quarter commercial and operational performance.
Speaker Change: Hunger, please.
Enrique Venta: Thank You. Enrique. Good morning everyone.
Enrique Venta: During the quarter, we took several decisive actions focused on 2 guiding priorities mentioned by Enrique.
Enrique Venta: Customer demand and sustained profitability.
Enrique Venta: These included deploying capacity with agility without affecting already booked passengers.
Enrique Venta: Rapidly diagnosing elasticity in both domestic and international markets.
Enrique Venta: which performed differently as the domestic was more responsive to lower base fares, while International showed lower elasticity,
Enrique Venta: and,
Enrique Venta: Continuing to deliver. Excellent customer service. While introducing new value options for customers.
Enrique Venta: And passengers and targeting new customer segments.
Enrique Venta: Let's now move to our commercial results.
Enrique Venta: While also highlighting the aforementioned initiatives and Associated outcomes.
Enrique Venta: As the quarter progressed, we began capturing higher fairs in close in bookings and saw continued strength in ancillary purchases.
Enrique Venta: We adjusted our capacity growth to support traum.
Enrique Venta: We reduced asms each month of the quarter, resulting in 8.7% year-over-year growth or 1.7% sequential growth.
Enrique Venta: Domestic load Factor reached 88%. While International load Factor was 75%. As we prioritized yields overloads, resulting in a total load factor of 82% treyzon declined, 12% year-over-year to 7.8 cents.
Enrique Venta: Versus the 17% reduction, we observed in the first quarter.
Enrique Venta: Ancillaries continue to be a significant bright spot in our business.
Enrique Venta: These products have proven highly resilient in all conditions.
With our average ancillary Revenue per passenger remaining virtually unchanged across markets.
Enrique Venta: Our average until we Revenue per passenger for the quarter was $54. Continuing a strong Trend above the $50 threshold, and consistently accounting for over. 50% of total operating revenues.
Enrique Venta: Purchases from members of the v-club are discount club now drive around 16% of our total revenues.
Enrique Venta: Digging deeper, we are adapting our business model to meet the changing needs of the market.
Enrique Venta: This includes lowering barriers to travel serving, diverse customer segments.
Enrique Venta: And encouraging repeat travel.
Enrique Venta: All of this has been accomplished without losing our DNA as an ultra low cost carrier.
Enrique Venta: To lower barriers to travel. With recently decoupled the airport you see from the ticket purchase process allowing customers to pay the fee anytime before check-in rather than at the time of booking.
Enrique Venta: This enables travelers to lock in low base fares while giving them the flexibility to pay the expensive airport fees later on.
Enrique Venta: We also introduced a summer campaign aimed at stimulating International demand, which remains strategic and profitable despite recent softness.
This initiative gives customers greater flexibility, if their plans change, they can cancel their booking without penalties and request the refund.
Enrique Venta: In addition, we are maturing our paid ancillary product that allows passengers to cancel for any reason, providing extra piece of mind and more flexibility for their travel plans.
Given the Mexican market configuration. We Believe Volaris is well positioned.
Enrique Venta: To address more diverse.
Enrique Venta: Attractive passenger, segments.
Enrique Venta: to capitalize on this opportunity, we have expanded our customer footprint through culture agreement,
Enrique Venta: which generate additional revenues without adding cost.
Enrique Venta: Frontier was our first and most natural partner given our shared ownership and compatible systems.
Enrique Venta: As a reminder, this partnership contributes around 2 to 3 percentage points to our International load Factor.
Enrique Venta: Building on that success.
Enrique Venta: We have developed further Partnerships with Airlines such as Coppa.
Enrique Venta: Iberia and Hainan aligned with foreign investment in Mexico. The Mexican diaspora and inbound tourism.
Enrique Venta: As a key step in driving, repeat travel and rewarding, passenger. Loyalty! We are pleased to announce the launch of our in-house loyalty program altitude.
Enrique Venta: The growing strength.
Enrique Venta: Of our recurring revenue streams.
Enrique Venta: Is a clear validation for this move.
Enrique Venta: Nearly 30% of our bookings include at least 1 membership product.
Enrique Venta: Signaling strong. Customer engagement.
Speaker Change: Historically, loyalty programs, and international Partnerships. Have been dominated by Legacy carriers in Mexico.
Speaker Change: However, we believe there is significant opportunity for us to grow in this space without sacrificing our cost advantage.
Speaker Change: With strong presence, in key markets like Mexico, City, Tijuana and guadalahara. We are well positioned to expand this strategy further.
Speaker Change: As the largest airline by passengers in Mexico.
Speaker Change: We are excited about the value that all these initiatives, bring to both our customers and to ours.
Speaker Change: Polaris as the airline of choice, not only for our core VFR base. But for all passenger, segments, traveling from our key cities across the network,
Speaker Change: We know how to introduce new ancillaries and Partnerships in a low-cost low complexity way and you can expect us to continue innovating our offering.
Speaker Change: Moving to our operations in the second quarter key metrics remains strong.
With a non-time performance within 15 minutes of 80.9% is scheduled completion rate of 99.6% and continued strength in the overall Volaris experience reflected in customer satisfaction and the net promoter score of 34%.
Speaker Change: Looking ahead to the third quarter, the summer season node factors are in line with normal seasonality. And the revenue team is working on yielding up on clothes in bookings, with customers making decisions closer into departure.
Speaker Change: And we also remain tentative to macro and geopolitical headlines.
Speaker Change: I want to reiterate on Enriquez priorities for Volaris customer demand and sustained profitability.
From my perspective, the capacity reductions already executed, are sufficient to align with demand and support the achievement of our full year guidance.
Haime: Now, I will turn the call over to haime to cover our second quarter, 2025 Financial results and guidance.
Speaker Change: Thank you, hoger.
Speaker Change: Our financial performance through the second quarter, evolving line with what we had anticipated and we work with discipline to maintain our costs and financial position.
Speaker Change: compared with the same period last year, our second quarter 2025 results were as follows
Speaker Change: Total operating revenues were 693 million and 5% decrease.
Speaker Change: On the cost Side Custom was 8.05 cents, a reduction of 0.3%.
Speaker Change: Average economic field cost decline 14% to 2.46 dollars per gallon.
Speaker Change: Castle. Mixed Field was 5.69 cents up 7% aligned with our guidance as we confront costs in spite of flying Fuel and plant asms doing this period.
the main changes year over year with regards to the specific pnl lines, where in maintenance, as well as aircraft and engine, variable this expenses
Speaker Change: The increase in the maintenance line resulted from a higher number of maintenance events and increase aircraft utilization.
Speaker Change: Aircraft and engine variable. Lease expenses, Rose 24% mainly due to redelivery approvals for the scheduled aircraft returns,
Speaker Change: In the other operating income line, we booked sale and list back gains of 4.8 million related to nervous. Deliveries of 2, new aircraft.
As a reminder, this line also includes our aircraft rounding compensation from pratten with.
Speaker Change: Give it that rich 194 million with a margin of 28%, which came in above the guidance, provided for the quarter.
Speaker Change: If it was a loss of 22 million with a margin of minus 3.2%.
Speaker Change: Finally, we incur a net loss of 63 million translated into a loss per ads of 55 cents.
Speaker Change: Moving briefly to our panel for the first 6 months of 2025 compared to the same period of 2024.
Speaker Change: Total operating revenues were 1.4 billion and 8% decrease.
Speaker Change: Casum was 7.97 cents. A 1% decrease with an average economic fuel cost of 2.54 dollars per gallon. 13% lower gasoline fuel was 5.54 cents, 6% higher,
Speaker Change: If it are total 397 million at 20%, decrease with an evor margin of 29%.
if it was a loss of 32 million representing, an even margin of minus 2.4%,
Speaker Change: net loss was 114 million or minus 1 dollar per ads.
Speaker Change: Turning now to cash flow and balance sheet data.
The cash flow generated by operating activities. In the second quarter was 136 million.
Speaker Change: The cash outflows used in investing and financing activities, were 60 million and 197 million respectively.
You're late is 2 at 8 8. 5, 0 0.
Speaker Change: Bolaris and then the quarter with a total liquidity position of 788 million.
Representing 26% of the last 12 months total operating revenues. We are maintaining a discipline and conservative approach to cash management with a target of keeping liquidity above 24% of the last 12 months Revenue.
Speaker Change: The same discipline and conservativeness, apply to our debt management.
Speaker Change: Our net debt to evaluate the ratio is to a 2.9 times. A slightly above the 2.7 times in the first quarter of 2025 and on change from the same period last year.
Speaker Change: While we expect a sequential increase in the third quarter, this is anticipated to Mark the peak of Leverage with World Improvement projected through the end of the year.
Moreover, all of our pre-delivery payments for aircraft to scheduled for delivery through mid 2028 are already financed.
Our strong balance sheet with no material near-term than maturities. Excellent. Liquidity position and discipline in controlling costs. He was confident that bolaris is well, positioned to navigate the current environment.
Speaker Change: now, turn into a engine availability and our Fleet plan, as of June 30th, our Fleet consisted of 149 aircraft with an average age of 6.5 years with 63% of the fleet being fuel, efficient new models,
Speaker Change: During the second quarter, we had an average of 36 engine related, aircraft roundings.
Speaker Change: Turning now to guidance.
Speaker Change: We are assisting the opportunity to focus on what we can control and reduce the range of potential outcomes for the Year by adjusting capacity to prioritize profitability.
Speaker Change: With that improved visibility. We are reinstated our full year, Evita margin guidance and expecting sequential Improvement in the second half of 2025.
Speaker Change: As a result, our updated full year, 2025 guidance is as follows.
Speaker Change: ASM Road of around 7% year-over-year, compared with our prior expectation of 8% to 9%,
Speaker Change: Give it our margin in the range of 32 to 33% and capex net of Finance Fleet pre delivery payments of approximately 250 million dollars.
This Outlook assumes an average foreign exchange rate of around 19.65.
Speaker Change: We also assume an average US Gulf calls yet filled price of approximately 2.1 per gallon.
Speaker Change: Moving on to our third quarter of 2025 guidelines, we are expecting.
Speaker Change: ASM increase of approximately 6% year-over-year.
Speaker Change: For around 8.6 cents.
Speaker Change: Castle. Mix fuel of approximately 5.5 cents and an initial margin in the range of 32 to 33%.
Speaker Change: This quarterly Outlook assumes an average foreign exchange rate to for around 19 Mexican pesos per US dollar.
Speaker Change: And an average US Gulf Coast yet filled price of approximately 2.2 dollars per gallon during the quarter.
Rick: Now, I will turn the call back over to Rick for closing remarks.
Rick: Thank you. Hi man. Willaris is a 1 of A Kind investing class airline in North America. We are truly a world Benchmark in unit cost, and have a strong balance sheet to help us weather. The volatility, we are attractive to the source and lenders with low leverage and no near-term maturities, I will longstanding leadership. Team brings exceptional industry expertise and stability, which continues to be a key differentiator for golis. And I feel
Rick: Very proud of that.
Rick: Well, let me share a growing customer base in an emerging economic region where we have played a leading role in democratizing air travel over the past 2 decades.
Rick: In Mexico 73% of the domestic Market is served by ultra low cost carriers on the scoring. The strength and viability of this model in emerging economies nearly 40% of our roots are uniquely served by Polaris. Enabling us to continue converting both passengers to air travel through our highly competitive pricing.
Rick: Diversifying our passenger segments when combined with our strong operational performance. This makes for resilient differentiated business model with enhanced margin mix, distinct from the US landscape in many, many meaningful ways.
Rick: Thank you very much for listening, operator, please open this line for questions.
Speaker Change: 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 anytime. If, at any point, your question is answered. You may remove yourself from the queue by pressing star 1 1 again.
Rick: Questions will be taken in the order. They are received.
Rick: Those following the presentation by the webcast, may post their questions on the platform. Please hold while we call for questions.
Speaker Change: Our first question comes from the line of Thomas Fitzgerald with TD Cowen, your line is no open.
Hi, um, congrats on the nice results and thanks so much for the time. I was just wondering if you could maybe unpack, um,
Just kind of how you're thinking about pricing scenarios for and like Rasam scenarios for the second half of the year a little bit more.
Speaker Change: Uh good morning Tom. This is hogar. Um so in the the first half uh we we did see some softness in line with the broader industry Trends. Um but if I would say starting a mid-quarter um of the second quarter we see sequential improvements.
Speaker Change: With the stabilization of demand and um Fair Trends ahead of the the peak summer season. Um, the demand Trends have been quite constructive. And um, we're also seeing, um, stronger potential for cross border traffic.
Speaker Change: um, as volatility, um, eases
Speaker Change: Um, we do expect that postponed VFR travel. Um, over the summer season will resume
Speaker Change: And that leads us um uh to see um, second half demand tracking stronger and in line with um, historical seasonality. That is both true for volume and for fairs.
Speaker Change: And uh, we see better trauma outcomes for the second half of the year.
Speaker Change: Okay. Great. That's really helpful and just as a follow-up. Um,
Speaker Change: Could you just help us on on the in-house loyalty program altitude? Could you help us think about the timeline to to ramp that up? And then, how are you thinking about that in a non- ticket Revenue per passenger about how, or how are you kind of, how should, how should outside investors, be um, forecasting, that potential business. Thanks for making up for the time.
Yeah, so this is hogar again. Um, so altitude is, is really designed to reward, um, repeat travel and, and drive loyalty for an expanding customer base, um, outside of the, the VFR core traveler. Um, it is expected to increase total revenue per passenger. Um,
By driving purchases in frequent and customer retention.
Speaker Change: And we've seen quite a positive impact. Um, customer reactions in the first couple of days of this program have been extremely positive.
Speaker Change: However um for this financial year 2025, we do not see any material Financial impact. Um we are focusing on scaling um the program and the enrollment in the program and we should see more meaningful impact um of of this program in subsequent years.
Speaker Change: Thank you.
Our next question comes from the line of Michael lehnenberg with Deutsche Bank. Your line is now open,
Speaker Change: So hi. This is Sean dardi. I'm from Mike. Thank you for taking my question. I'm just curious about how demand Trends in other markets, besides the US have trended, you know, heading into this strong summer travel period, which is really on the international front Central America and into South America. Thank you.
Speaker Change: Um, hi, this is hogar again. So, um, we seeing, as I mentioned, a recovery in the transporter Market, but we're also seeing the same Trends in the domestic Market. Um, I can tell you that customers are deciding more close in to book their travel for the summer.
Speaker Change: The third quarter, and the fourth quarter.
Speaker Change: Great, thanks. And just a quick follow-up. Uh, honey, I think that you gave us the number of grounded aircraft in the second quarter and impacted engines from gtf, can you just repeat that? And what your expectation is for the full year? Yes, I don't. We we on the second quarter, we have 36 aircraft ground there, that number should be the same for the rest of the year. It's going to be between 35 and 36, but I I it's important to mention everyone, everyone. It should be thinking about ASM growth.
Speaker Change: We have been controlling the situation and managing the situation over the past 24. So it's like the new normal and we are well prepared to continue operating like that. But we see Improvement going forward and the situation should be proving broadly.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Dwayne Finnick worth with evercore isi. Your line is now open.
Speaker Change: Hey guys.
Speaker Change: Good morning. Um, can you speak to uh, transborder stability? Specifically
And, and maybe just play back the history for us. When, when did you first see the pause or the pullback, um, and could you play back kind of Trends through the balance of the, of the second quarter, uh, to today?
Hi Dwayne, this is hoeger again. Um, so yes. Um, as I as I mentioned, um, mid-quarter, uh, of the second quarter, uh, we did see uh, improvements um, of demand patterns and um, fair environment in the transporter Market, um, and the stabilization, um, of, um, of demanding ahead of the peak season in the summer, we believe. Uh, we are convinced that, um, VFR travel
Speaker Change: is resuming, people want to see their friends and family over the summer vacation period and that um, the uh, retraction of the demand that we saw earlier on the in the year was temporary and that structural demand in the transporter Market remains solid
Speaker Change: And is that just to put a finer point of that is is that Mexico outbound Mexico? Inbound? Is it? Is it fairly balanced? Are you seeing that stabilization across both?
Speaker Change: Dwayne, it's it's quite balanced. Um, both, uh, point of sale in the US and point of sale. In the Mexican markets, going towards the US.
Speaker Change: okay and then just with the re revision and capacity uh for the full year and and for the back half can you talk about the you know the relative revision for international capacity growth versus domestic capacity growth
Speaker Change: Yeah, sure, sure Dwayne. Um, so so we've um slightly lowered. Our ASM growth plans for the full year from 8 to 9 % originally to now 7% as M growth for the full year and that really reflects both engine availability.
Speaker Change: And our commitment to profitable growth. And if you break that down, um, by, um,
Speaker Change: By geography, um, we're currently, um, guiding to a 6%. Um, ASM growth for the third quarter.
Speaker Change: Um which is a lower growth in the domestic um roundabout 4 4 to 5% and international um in the mid teens.
Speaker Change: For the third quarter, that's the breakdown.
Speaker Change: Okay, thank you.
Speaker Change: Thanks.
Our next question comes from the line of Steven Trent with City. Your line is now open.
Steven Trent: Good morning, gentlemen. And and uh, thanks very much for taking my question. Um,
Steven Trent: Can you hear me? Okay, by the way? Yes, we can see. Oh, great. Thank you, sorry. I was having some trouble with my phone. Um, just curious. Thank you very much for the caller, on, uh, next year's capacity growth. You know what we think about, uh, the World Cup event coming up. Um, do you think that this is something that, uh, potentially significantly move the needle for you guys? Um, or is it just sort of, Too Short, a period to uh, really make a, you know, a big difference in in rosin, for example, thank you.
Speaker Change: Stephen now this is hoeger again. Um so let me tell you a little bit about the World Cup. We do have excellent connectivity, um with the host cities um Baris operates in 10 of the 16 official host cities.
2% of total matches.
Um, and if you include the frontier code share that, that we that enables us to, you know, uh, diversify our, our network, uh, together with Frontier, we reach, um, 13 of the 16 host cities. So we do see this as a, as a, a Tailwind, um, for next year, for the summer season.
And, uh, we will Monitor and adjust capacity, um, accordingly for that 2 months, uh, approximately period and, uh, we might explore. Um, external lifts if we need external lifts for, for that 2 month, period,
Speaker Change: Great caller holder, appreciate that. Um and just um a a quick follow up. I I know some of this political stuff is like impossible to predict but um you know with everything going on today, this sort of dispute between uh us do and and Mexico possibly uh competitors going to have a a joint business agreement canceled. You know, when you think about uh all of the stuff in the mix is it conceivable that all our sequel that cancellation helps virus, you know? And
Speaker Change: Has it really made any difference in terms of how you guys operate your Northbound flow or is it really not doesn't make it a difference at this juncture? Thank you.
Enrique Venta: Steve this is Enrique. Um let me tell you we met with the Mexican Government. Uh yesterday and uh I remain confident that both governments will reach a logical and mutually beneficial agreement.
Enrique Venta: to be honest with you, when you take a look to the points that are on their discussion,
Enrique Venta: Um, most of them, um, are kind of a delayed agenda that, uh, given the changes in both governments. We couldn't, uh, tackle at the end of the previous government, but we will continue to provide updates as appropriate. And, and we have to be, I mean, being consistent with our approach and situations like this, um, I don't think we should speculate. Um,
Enrique Venta: It, it's not related to a category 2, downgrade, I mean in Practical terms, the order simply requires us to submit our schedules to the US Authority. And um, I mean uh in line with the way our government has managed, its relationship with the US will feel tremendously confident that the solution is going to be here in the next days.
Okay, super helpful. Thank you.
Speaker Change: Our next question comes from the line of rogerio. Aerio with Bank of America, your line is now open.
Hi gentlemen, good morning and congratulations on the results. A couple here 1 is uh on as growth for 26 and 27. Any preliminary expectation, you could share sum writing of aircraft and they could upcoming deliveries
Speaker Change: Maybe a range we could rely on.
Speaker Change: And also with the current T. Rest level, how much margin would you expect bolaris to deliver if not for the grounding of the of part of the fleet?
Speaker Change: And interview with the net margin, be on positive territory. If we would consider a theoretical normalized operation
Speaker Change: Thank you.
Speaker Change: Appointment for the next year. Uh, what I do want to highlight is that flexibility for us remains a strategic advantage.
Um, especially as we, um, look at the evolving macro and competitive Landscapes. What we are currently targeting? Very preliminarily is an ASM growth in the mid single digits.
And um, this strategic flexibility that I mentioned, enables us to adjust capacity up or down.
Speaker Change: Around about 3 percentage points in either direction.
Speaker Change: And it helps us to respond very quickly to shifting uh demand Trends both upward and and downwards.
Speaker Change: What we do want to maintain uh and we want to emphasize next year is margin discipline um despite um all the macroeconomic uncertainty. Um and we want to reiterate that we are well positioned to grow in an emerging market.
Speaker Change: 37 margin in a normal scenario, with a normal productive versus non-productive sleep. If it should be 2.5 points, better, if it are should should right now has a benefit of around 4 points. And the net margin will be 3 points, percentage points higher than current conversion due to the grounding
Speaker Change: Okay, that's very helpful. Thank you. I, I actually got the line cut my team as well at the beginning, so maybe there was some kind of problem with your line. Could, if you could, please repeat, uh, range for admin growth for 26 and 27, if you, if you have said so,
Speaker Change: Yeah, so so I uh mentioned rogerio that um our capacity growth for next year. We're targeting ASM growth in the mid single digits.
Speaker Change: Um, and uh, with the flexibility of plus minus 3 percentage points.
Speaker Change: To respond to shifting demand patterns.
Speaker Change: Okay, very clear. Thank you so much 26th, and 27th is, is too early to say right now.
Speaker Change: Okay, thank you.
Pablo Manas: Our next question comes from the line of Pablo. Manas with Barclays, your line is now open.
Pablo Manas: Hi. Uh, thanks for taking my question. Just a little bit of follow up on the demand side, uh, besides immigration impact. Uh, have you seen any impact on the soft economic activity that we're seeing in Mexico, particularly in the domestic market? And also, if you can share some pricing Dynamics within the domestic Market. Uh, for example, uh, I would love to to know if you're seeing some price sensitivity on the Leisure Market, relative to VFR and the domestic side.
Just uh, some more color will be welcome. Thank you.
Your question could you repeat the the the initial question uh, so that we can follow up? Thank you.
Speaker Change: Yes, on the impact on demand of uh Mexico's, soft economic uh activity.
Speaker Change: If I met, um, Pablo, I think, um, um, we, uh, as mentioned in our remarks. Well, there are some uh, micro signals to watch.
Speaker Change: Um, there's some other macro signals that we need to watch to, okay? And let me give you 3 examples which are very important. I mean foreign direct investment remains strong. It reached 21 billion in the first quarter, which is a 9% higher than the previous year in the same quarter. And this reflects the sustained long-term confidence. A second example are retail sales in Mexico, which fell minus 2% year-over-year in May
Speaker Change: in the us posted a plus 4% year-over-year in June and this highlighting strong demand across our markets.
Speaker Change: Um, remittances are recovering with June estimates of 13% year-over-year, reinforcing household consumption. After a temporary dip in May, I will pass it over to hogar. So he explains, um, the Dynamics on domestic and international and Marcus break broken down by segments.
Hogar: Yeah. So um, this is hogar. Um, there's 2 main Trends in the domestic Market. Um, when we look at, um, bookings number 1. Um, we do observe quite significant base, fare elasticity, um, for far out bookings.
Speaker Change: Uh, yeah, for us giving us the ability to stimulate demand, um, further out.
And then for um, closer in bookings, customers are deciding very much last minutes um, to buy, um, their summer vacations for the high season, July and August. So we're seeing quite a robust close in bookings. Um, those would be the 2 in the in the domestic Market.
Speaker Change: And that coupled with strong ancillary sales, um, we're now seeing ancillary products, um, being in the range of 60% of total operating revenues and ancillary products, and sales have been quite resilient to any demand, shocks.
Speaker Change: Polaris is doing things.
Speaker Change: Leaving the capacity. Basically that is, is, is installed in the market, um, leading in pricing leading in choices for our customers leading. In the way, we perform from the operational perspective, and I think that's what's making the tremendous improvement in our numbers, and where we feel very, very bullish or bullish for the future.
Speaker Change: Thank you very much.
Speaker Change: Thank you. Our next question comes from the line of Guerilla, May Mendes with JP Morgan. Your line is open.
Speaker Change: Hey, good morning guys. Uh, thanks for taking my question. Uh, first 1 is a follow up on the booking curve. I guess it's clear that passengers are are, are buying tickets uh, closer to the actual flight date. But the hoeger when you compared to the first quarter, uh I I already starting to see an improvement on on the booking curve on the actual visibility on the booking curve or not necessarily.
Speaker Change: And the second point is on the, on the overall competitive environment. If mind sharing, uh, your views on how, uh, competitions is behaving and the overall industry rationality. Thank you so much.
Speaker Change: Okay, so the uh, uh, this is hoeger. Um, so yes. Um, we did, um, we do see an improvement versus the first half of the Year, especially the first quarter. Um, starting in mid second quarter, we see a stabilization of the man patterns both in the international and the domestic Market.
Speaker Change: And, um, demand for the second half of the year is, is tracking, um, stronger. Uh, remember that the second half of the year is seasonality, adjusted. Always, um, uh, stronger than, than the first half of the year. So we do see um, a more positive, um, outlook for the second half of the year.
Speaker Change: um, in terms of, um,
Speaker Change: competition and capacity.
Speaker Change: Um, it is, um, encouraging to see that industry-wide capacity.
In both International and domestic Market is adjusting with the demand. Um, the capacity, uh, environment in the domestic Market has been quite, uh, rational. Um, I do want to highlight that Volaris was the first carrier to make significant capacity. Reductions um, focusing on cash. Positive flying and ebit positive flights.
Speaker Change: And uh we we see that. Um the industry has also adjusted their capacity downwards to bring capacity growth more in line with demand patterns that we're currently seeing.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Abraham Fuentes, selinus with Benco Contender, Mexico. Your line is now open
Abraham Fuentes: Yes, thank you. Hi, good morning. Uh, could you give us more caller about your fuel hedging? Or are you please?
Speaker Change: Of course this is K.
Speaker Change: We are heading 40% of the consumption at a strike price of 2.15 dollars per gallon.
Speaker Change: Okay, perfect. Thanks.
Speaker Change: Thank you. Our next question comes from the line of Yin speeds with Morgan Stanley. Your line is now open.
Yin Speeds: Yes, hello everybody. Um, thank you for taking my question. I have 3 actually. If I met, um, the first 1 is
Yin Speeds: if there are any potential capacity easing at the Mexico City Airport,
Yin Speeds: What was the implications for you? Um, I mean, I guess obviously there would be positive but in what magnitude um, secondly, uh, just to to delve deeper into the 3 percentage point in either direction of capacity. Uh, flexibility that that's for 2025, right? So, basically concentrated in the second half of this year just to, to, to, to be clear. I understood it correctly. And lastly, um, taking into account your new, um, your new capacity guidance. What are you assuming for the rest of the year? In terms of redelivery?
Speaker Change: And deliveries. Thank you.
Further improvements in the next year and a half.
Speaker Change: there's 1 possibility, which will take, um,
Speaker Change: about the year and a half to 2 years to be constructed, which is a faster. Um,
Speaker Change: runway for landing and uh, and uh, being able to to pull out much faster from from from the active road, but that's going to take about a year and a half and 2 years and, um, it's it's a well,
Speaker Change: Studied proposition as of now, um, still not on their execution.
Speaker Change: Speaking about the rest of the things, I will allow.
Speaker Change: Him to give you the responses that you requested.
Speaker Change: Hi, Jen. How are you? This is first on, on, on capacity and red deliveries and deliveries of new planes. We are going to be with delivering to aircrafts uh during the second half of the year. And we are going to be receiving 8 new aircrafts in in in the second half. But again, remember I think about ASM growth. We already provided the guidance of the of the acip growth and for the second half. And as all your mentioned, in terms of the flexibility of capacity, uh, that flexibility the year, 2025 the guidance includes what we feel comfortable in order to deliver the guidance that we provided, and 42026 that will be in
Speaker Change: The meeting single digit with the potential to go 3 or 3 percentage points below the pending on how we see capacities.
Speaker Change: So we were referring to, uh, 2026 yen.
Speaker Change: Oh, perfect. All right, Perfect. All right. Thank you. Thank you.
Speaker Change: Thank you.
Speaker Change: Our last question is from Alberto Valerio with UBS your line is now open.
Alberto Valério: I thank you for for the opportunity and hickey and her. Uh, I had 2 on my side, uh, the first 1 about your flexibility, within the various Network, how you guys are between domestic and international look like domestic. It's a little more stronger than the international for this year. I do with the job, political conflict, and so forth. How, how, how flexible are you guys who to change the routes? And my second 1 is about the initial remarks of hogar, in, in the, beginning of the call about the unbounding, uh, the terrorists of the airports. Have you seen any, uh, change in the behavior of the consumer? Uh, in terms of the air quality? If they are, preferring to go to 1 Port and avoid another 1 to check with your city, thank you very much and congrats to the results.
Hogar: Uh hello, this is hogar again so regarding your first question. Um, I think um what um, distinguishes us from our competition is the flexibility that we have in deploying capacity. Our guiding principle is Cash, positive flying and profitable flying. And we will allocate capacity wherever, um, that is the the maximum in, in any market. So it could be in the US or in the domestic market and we look at that on a route by Route basis
Hogar: Uh, regarding the the second part of your question. We recently unbundled, um, the airport fees which are very significant in Mexico and quite expensive and can exceed the base fare, in many instances.
Hogar: From the actual ticket price and we give the customer the choice.
Hogar: To pay whenever they want either at the time of booking or any time between booking and checking.
Hogar: And that really enables us to show the really, really low bass fears that we have directly to the customers and enables customers.
Hogar: Uh, to buy those low base pairs, well in advance. And with that, um, we stimulate, uh, demand through low, low base pairs that are actually visible on our website. And we have seen a good uptake um of customers that prefer to pay the airport fees um, after the purchase um, between 2
Hogar: 25, and 30% of our customers, choose to pay the airport fees.
Hogar: Before check-in and not at the time of purchase. So it's been a net positive for us.
Hogar: And the customer. Thank you very much.
Hogar: and excuse me, this
Closing remark.
Hogar: Please go ahead, sir.
Hogar: And the geopolitical issues are affecting the business models in in in the aviation Market. But there's something I want to strengthen in a very important way. We are in control of this company, we are very positive, we are controlling capacity, we are controlling pricing. We are controlling our execution in terms of operations and that is marking a change. In what we are perceiving towards the future. It is important to say that we remain positive that we see stabilization of demand that. We have a very resilient business model and discipline, focus on what we can can control.
Hogar: Finally, I would like to. Thank you very much, our family of ambassadors. Our board of directors, our investors our bankers, and our resource, and suppliers for their support. I look forward to speaking to you all on the third quarter call and thank you very much for all the support you provide to this company.
Hogar: This conclusive valerious conference call for today. Thank you very much for your participation and have a nice day.