Transcript • Apr. 28, 2026 2:00 PM • Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (VLRS)
Transcript
Apr. 28, 2026 2:00 PM
Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (VLRS)
Holger: from higher fare carriers that service the U.S. transporter markets towards our lower fare, base fare model and unmodeled model. So that's what I can tell you about how we're passing through fuel prices. It's a little bit better in the international market, as I mentioned.
Unknown Analyst: Okay. And then just my second question on the capacity front, we've already seen Aeromexico report and they're scaling back their capacity several points as as are you what about the rest of the competition um whether with um you know from in this case it would be mainly non-mexican carriers what are you what are you seeing in competitive markets are you seeing supply come out at what you expect or maybe it's even faster than expected thanks for taking my questions
Holger: So we've seen capacity prudence by all competitors in the market. We've seen adjustments, especially for the second quarter of all domestic carriers and in the international market as well for the second quarter. As we move into the high season, July and August capacity cuts have not come through yet and we are still holding off as well. But we are ready to make further cuts if the fuel price environment remains where it is right now. And as a reminder, our second quarter ASM guidance is now 0% to 2%, which is 10 percentage points less than we had originally planned for the second quarter of 2026. Great. Thank you. Just to follow on here, if you'd like the breakdown between domestic and international for the second quarter, we reduced the domestic market by around 3%. and international is going to be mid to high single digit growth because international has been more robust in 2026.
Unknown Analyst: Great. Great. Thanks, Holger.
Operator: Thank you. Our next question comes from the line of Rogerio Arujo with Bank of America. Your line is now open.
Rogerio Arujo: Hi, guys. Congratulations on the capacity and yield management delivered. I have a couple here. First of all, there is a 70 cents of cash next year impact from the recurring and capacity reductions. Will all this go away as of the 30Q26, or should we continue to see part of that impact? That's the first one. And the second is, how is the company managing to keep capacity growth under mid-single-digit rates by flying back the grounded aircraft from Breton Whitney? And are these going to generate extra delivery costs besides the one-off expected in the second queue? Thank you.
Jaime: Thank you for your question. This is Jaime. Starting with Casomex, as Jaime mentioned, the second queue will be the highest peak of the year. And as times continue, it will normalize. As mentioned, we have an impact of around 0.70 cents just by non-recurring items in the second queue. If you add the FX effect plus the capacity cut, it's also like around 0.22 to 0.3. So CASOM is aligned with the CASOM mix that we have last year. I think CASOM for full year will be at the level of 6.2, which is aligned with the recovery on productive fleet that we budgeted for the year, which is aligned with the plan that we have been working together with Pratt. And so we are strong believers that we have a strong CASOM position. We have a lot of CASOM projects which is non-fixed or semi-viable, 70%, which that will continue. And we are going to get the price on the investment on the returning to normality of the fleet in the future with a lower custom than the custom that we are going to be posting this year.
Unknown Analyst: Perfect. Thank you. What about the...
Rogerio Arujo: How is the company managing to keep the capacity growth below mid single-ditch rates while you receive all these aircraft back that are currently grounded?
Enrique Beltranena: Rogerio, this is Enrique Beltranena. I just want to remind you, and I have been very, very persistent in the saying that our fleet management is a combination of four very important pieces. First, the return of Pratt & Whitney engines and the incremental fleet that that creates. Second, the re-delivery of the aircrafts that we have in the pipeline. Third, the arrivals of the Airbus aircrafts that are new aircrafts coming into the fleet. And finally, we manage the whole equation in a way that it creates a balance of the ASM growth that we are presenting. I want to be very persistent on that and very clear. It's not that we're incrementing fleet in a nonsense way. The addition of all these four pieces make a total equation which controls the capacity based on demand from the customers.
Jaime: And some data on the general comment made by Enrique. These year actions that we have already implemented for deliveries that were targeted for Volaris this year, we sold those aircrafts to Alessor. In addition, we postponed seven deliveries of 2027 and three deliveries of 2028 until 2023. So that has managed capacity, but also helps the cash because we're all avoiding PDP payments towards that. And those examples that we have structurally in our fleet strategy embedded in the business that will allow us to cut capacity in the really short term. We did it last year. Originally, we were going to grow 15%. We ended up growing only six. This year, we initially thought that we were going to grow 7%. Our expectation is 4%. And that's embedded in the fleet flexibility that we have worked over the years.
Rogerio Arujo: That's very clear. Thank you so much.
Operator: Thank you. Our next question comes from the line of Wayne Sinek with Evercore ISI. Your line is now open.
Wayne Sinek: Hi. Thank you. My first one is just about your merger agreement. I'm not sure if you can talk about it, but given how dynamic the backdrop has been since this agreement was first announced, are the economics fixed in your agreement, or are there adjustment mechanisms based on your relative profitability?
Enrique Beltranena: So let me start saying that I think that even before higher fuel prices delivers clear benefits across stakeholders. It creates greater connectivity and sustain lower first for customers. in a stronger and more resilient platform with enhanced long-term value creation for shareholders. I think in a higher fuel environment, scale becomes even more relevant, and this combination strengthens our ability to manage controllable costs through procurement efficiencies, better asset utilization, and operating leverage at the group level. Importantly, the structure allows both airlines to maintain independent operations, limiting execution risk while capturing scale benefits, positioning us to accelerate growth and deepen penetration of the ultra-local carrier model across Mexico and the trans-border markets. Having said that, the authorities do not take into consideration these kinds of comments, so we need to accelerate and continue working very hard with authorities to get the approvals that we need as soon as possible.
Wayne Sinek: Thanks for that, Enrique. Maybe just to follow up, from the perspective of Volaris equity holders, assuming that you do ultimately get regulatory approval, is the ratio fixed or are there adjustment mechanisms based on how the relative profitability plays out?
Enrique Beltranena: No, there are no that kind of mechanisms in the transaction.
Jaime: Well, there are many conditions precedent for the transaction to close. So I'm pretty sure the board of directors will make the right decisions for the transaction to be generating value for all of the shareholders of Volaris.
Wayne Sinek: Thanks for that. And then just for my follow-up, you mentioned in the prepared remarks greater flexibility to make capacity changes closer in. Can you just expand on that a little bit? What are the drivers of that flexibility from a crew perspective? Thanks for taking the questions.
Holger: In our model, yeah, sorry, Dwayne, this is Holger. We believe that we have a model that is more flexible inherently than US legacy carriers or any US carriers, as a matter of fact. And that is driven by lower restrictions on the crew rostering side. And we're focusing on schedule capacity reductions that are focused, for example, on off-peak frequencies We can quickly adjust underperforming routes with the new fuel price environment, lower yield markets. And we are really focused on optimizing the profitability of our network while maintaining network connectivity for our customers. So we're not canceling any routes. We're nimbly adjusting frequencies as the fuel price environment evolves.
Rogerio Arujo: Okay. Thank you.
Operator: Thank you. Our next question comes from the line of Felipe Nielsen with Citi. Your line is now open.
Felipe Nielsen: Hey. Hello, everyone. Thanks for taking my question. I just wanted to understand a little better how the booking curve is evolving for you guys in different markets and trying to reconcile that with okay, we now know what are you expecting for second quarter, but trying to understand how this should roll into third quarter and fourth quarter. Other carriers mentioned a little bit about the expectations on fuel cost recapture later in the year. You mentioned around 20% to 30% in second quarter. Just wanted to understand how you expect pricing and margins to evolve as the booking curve evolves? Thank you.
Holger: Thank you. This is Holger again, and I'll start out with giving you a general sense of where we see the booking curves, and then talk a little bit more about fuel price recapture, and then pass it over to Jaime for the cost section. So in terms of booking curves and trends, we're seeing quite solid booking trends into the summer high season both in the domestic and international market the cross-border segment has improved steadily since basically mid 2025 after the relatively weak second quarter of 2025 the macro indicators in Mexico including consumption and wage developments remain stable and that translates into stable demand for our air services in the cross-border segments The demand trend that we've seen late in 2025 continues in the first quarter and the second quarter of 2026 with an international load factor increasing from 79% in the last quarter of last year to 80% in the first quarter and with improvements in the second quarter. In terms of fuel recapture, what I can tell you is that In the first quarter, a significant portion of our revenues was already booked, and that's also true for April, before the fuel prices spiked. So as a result, in the second quarter, we expect a fuel recapture in the range of 20% to 30%, given our price adjustments to base fare and ancillary revenues that are slowly trickling through the bookings. But as we move into the back half of the year and assuming the current fuel price forward curve, we expect a more progressive improvement of the fuel recapture just because our pricing actions and capacity adjustments are going to be fully reflected in the revenue base. So you'll see higher fuel recapture rates towards the end of the year.
Jaime: Based on the current jet fuel forward curve, we see a constructive trajectory in the second half, supporting improved earnings. Saying that, that support is equationally improving in operating margins, evitar margin and net profit, trending back to our original expectation by the fourth quarter of the year.
Unknown Analyst: Great. Thank you. And just a little follow-up.
Felipe Nielsen: You're seeing this positive oil curve going forward. Are you planning on rolling any hedges, like doing at least a little bit to protect from potential further spikes or anything in that sense? Thank you.
Jaime: continue to overlaid on a constant basis. If there's a good window to do some hedging, we will do it. We have not seen in the recent last weeks.
Unknown Analyst: Great. Very clear. Thank you.
Operator: Thank you. Our next question comes from the line of Julia Orsi with JP Morgan. Your line is now open.
Unknown Analyst: Julia Orsi, your line is open. Please check your mute button.
Operator: Our next question comes from the line of Jens Spies with Morgan Stanley. Your line is now open.
Jens Spies: Yes, hello. Thank you for taking my question. So just assuming that jet fuel remains at spot levels and does not come down according to the At what level should we then expect TRASM to be in the third quarter, just to get a sense of how much more price increases you would need and could make further down the road? Thank you.
Holger: We're going to continuously evaluate the situation on the fare adjustment and ancillary side. We are planning to sequentially improve the fuel pass-through towards the customers as we get more and more new bookings into our reservation system. We are currently showing a good trajectory in the second quarter, double-digit TRASM growth in the second quarter, and we plan to sustain that into the third quarter as well.
Jens Spies: Okay, perfect. Maybe ask a different way. You mentioned 20% to 30% fuel recapture in the second quarter. So what's like the marginal trasm excluding the effect of tickets already sold, the tickets that you sold after the fuel spike, what level are they more or less, just to get a sense?
Holger: for Holger here again. So the fuel recapture, as you said, for the second quarter, we're expecting 20 to 30%. As we see the forward curve materialize, that fuel recapture should increase. And we are planning to sustain the fair adjustments and the ancillary adjustments that we've already put through the system. But I can't give you a specific number right now to pass through in the third quarter.
Jens Spies: Okay, okay, okay. Perfect. And if I may, just one last question. You mentioned $2 million in fuel savings from switching to new generation aircraft. So first of all, is that at current jet fuel prices or pre the spike? And also, more or less, what's the delta in the lease cost of switching, just to get a sense of the net impact? Thank you.
Jaime: This is Jaime. As mentioned in the call, that $2 million corresponds to adding 10 aircrafts switching from CO to NEO at current fuel prices. In addition, there's no effect on rent because I'm paying for the rent for the 155 aircrafts, even though I have 32 aircrafts rounded today. So there's no effect on the lease payments.
Jens Spies: Yeah, but conceptually, like... So what's the delta in the lease of a new generation aircraft versus older generation aircraft?
Jaime: Obviously, NAILs are more expensive than the sales, but I'm paying for both today. And the deliveries that we are doing this year, which are 14 deliveries, are all SEALs, which is part of the strategic plan to reduce the gap between productive and unproductive.
Jens Spies: Okay. All right. Perfect. Thank you.
Operator: Excuse me. This concludes today's question and answer session. I would like to invite management to proceed with his closing remarks. Please go ahead, sir.
Enrique Beltranena: Thank you very much, operator. This is Enrique Beltranena again. I just want to finish the call saying that we remain confident on the actions that we're taking. And I want to thank you, our family of ambassadors, as well as our board of directors, investors, bankers, lessors, and suppliers. As I said in my opening comments, looking ahead, remaining confident is really important in our ability to navigate this environment. We think we have a very well-prepared company, a team management that has been successful through very much, many of the crises that we had in the past and will continue to prioritize profitability over growth. I look forward to speaking to you on our second quarter call in July and thank you very much to everybody for being here today.
Operator: This concludes the Valeris conference call for today. Thank you very much for your participation and have a nice day.
