Pablo Monsivais

Pablo Monsivais inquired about the potential impact of Nissan's rumored sale of the Compass plant in Aguascalientes on regional dynamics and the reason for Vesta's slightly lower margin guidance for 2026.

Answer

Lorenzo Dominique Berho Carranza, Vesta's CEO, viewed the potential plant sale positively, expecting new suppliers and continued manufacturing attractiveness for Aguascalientes, despite it becoming less relevant for Vesta. Juan Felipe Sottil Achutegui, Vesta's CFO, attributed the lower margin guidance to the strong Mexican peso impacting USD revenues against peso-denominated expenses, emphasizing continued cost control.

Pablo Monsivais of Barclays inquired about the potential impact of Nissan's reported plan to sell the COMPAS plant in Aguascalientes on the region's dynamics, considering Vesta's significant operations and land bank there. He also asked for the reason behind the slightly lower margin guidance for 2026 compared to 2025.

Answer

Lorenzo Dominique Berho Carranza, CEO of Vesta, commented that any outcome regarding the COMPAS plant would likely be positive for the sector, as the state-of-the-art facility would attract new players and suppliers, benefiting Aguascalientes. He noted that Aguascalientes is becoming less relevant for Vesta but acknowledged long-term relationships with auto industry suppliers. Juan Felipe Sottil Achutegui, CFO of Vesta, explained that the slightly lower margin guidance for 2026 is due to the surprisingly strong Mexican peso, which positively impacts dollar-denominated revenues but increases peso-denominated expenses like employee costs, necessitating continued strong discipline on cost control.

Pablo Monsivais of Barclays asked about Vesta's confidence in leasing over one million square feet in Monterrey, given the market's weak net absorption, and inquired about the competitive landscape.

Answer

CEO Lorenzo Dominique Berho Carranza clarified that recent property deliveries will significantly contribute to income in the second half of the year. Regarding Monterrey, he noted that while absorption is lower than in previous years, it remains positive. He expressed high confidence in leasing the new space, stating that Vesta's portfolio in Monterrey has zero vacancy outside of these newly delivered buildings, which are top-tier assets in prime locations.

Pablo Monsivais from Barclays questioned Vesta's confidence in leasing over one million square feet in Monterrey, given the market's recent weak net absorption compared to other regions in Mexico, and asked about the competitive outlook.

Answer

CEO Lorenzo Dominique Berho Carranza stated that recently delivered buildings will begin contributing significantly to income in the second half of the year. He noted that while Monterrey's net absorption is lower than in prior years, it remains positive. He expressed strong confidence, emphasizing that Vesta's only availability in the market is in newly developed, premium assets in prime locations, which are well-positioned to attract tenants.

Pablo Monsivais from Barclays inquired about the leasing activity for Vesta's three new buildings in Apodaca, Monterrey, totaling 1.1 million square feet, given the recent excess capacity in that market.

Answer

CEO Lorenzo Dominique Berho Carranza expressed confidence in leasing the Monterrey properties, noting their completion date is Q2 2025. He highlighted that minor delays were due to upgrading building specifications with enhanced sustainable features, which he believes will attract premier tenants. Berho emphasized the project's prime location, access to infrastructure, and Vesta's strong local leasing team.

Pablo Monsivais asked about the potential Viva Aerobus merger, specifically if its approval could lead to capacity rationalization and a more supportive yield environment for the domestic market in 2027. He also inquired about opportunities to increase aircraft utilization hours for incremental operating leverage.

Answer

CEO Andrés Conesa stated that it's too early to comment on the Viva Aerobus merger as it's in its initial stages, and any approval would likely involve remedies. He emphasized that Aeroméxico will continue investing in its premium product regardless of the merger outcome, noting their different business models. Regarding utilization, Andrés Conesa mentioned that wide-body aircraft have very high utilization, but there is room to improve utilization on the narrow-body fleet (E190s and 737s) as demand grows and the 4% capacity expansion is deployed. CFO Ricardo Sánchez Baker added that average narrow-body utilization is around 9 hours, with potential to return to 2024 levels closer to 10 hours, which would allow for significant growth over the next 2-3 years without stressing operations. Andrés Conesa also noted that the company is exploring growth opportunities outside Mexico City International Airport (AICM).

Pablo Monsivais asked about the potential impact of the Viva Aerobus merger on the domestic market's yield environment for 2027 and beyond. He also inquired about opportunities to increase average aircraft utilization hours and achieve incremental operating leverage, and whether this is fully embedded in the current guidance.

Answer

CEO Andrés Conesa stated that the Viva Aerobus merger is in early stages, and its impact will depend on regulatory remedies, emphasizing Aeroméxico's distinct business model and continued investment in its premium product. Andrés Conesa and CFO Ricardo Sánchez Baker confirmed room to improve narrow-body fleet utilization from 9 hours to closer to 10 hours (2024 levels), providing operational leverage into 2027 and 2028. Ricardo Sánchez Baker clarified that while partially embedded, the current guidance doesn't fully capture this opportunity, suggesting further benefits in subsequent years.

Pablo Monsivais asked if Venezuela's destination is included differently in this year's guidance, inquiring about potential upside if conditions improve or incremental costs if expansion occurs, and its impact on the unit cost trajectory. He also asked about any interesting trends observed regarding the World Cup this summer.

Answer

CEO Pedro Heilbron stated that Venezuela is not material to the guidance, and no significant changes are expected to impact results or unit costs, though upside is possible. Regarding the World Cup, Mr. Heilbron noted changing demand patterns due to the tournament in the US, Mexico, and Canada, posing a challenge. He mentioned flying extra sections to Toronto for Panama's games and actively managing the rest of the network.

Pablo Monsivais from Barclays inquired about the outlook for commercial revenues given the ongoing situation at Terminal 2 in Cancun and asked what percentage of tenant rents are denominated in U.S. dollars.

Answer

CEO Adolfo Castro Rivas explained that the Terminal 2 situation will negatively impact results for the next four quarters, until the expanded Terminal 1 reopens in Q3 2026. He clarified that commercial charges are based on passenger numbers and a percentage of sales, which are in pesos, though spending behavior is influenced by the exchange rate.

Pablo Monsivais followed up on commercial revenues, asking about the expected impact from the Terminal 2 situation over the next few quarters and what percentage of tenant rents in Cancun are in U.S. dollars.

Answer

CEO Adolfo Castro Rivas advised that the softness related to Terminal 2 is expected to persist for the next four quarters until the new Terminal 1 expansion is complete. He clarified that commercial rent contracts are based on sales, which are in pesos, and that revenue performance is more tied to passenger spending behavior than the currency of the contracts.

Pablo Monsivais asked about capacity expansion plans from U.S. carriers into Cancun for the second half of the year and if there is a specific target for commercial revenue per passenger post-MDP works.

Answer

Executive Adolfo Castro Rivas stated that ASUR is still awaiting summer season schedules from airlines and has no visibility on U.S. carrier plans yet. He described the commercial revenue per passenger goal as a 'moving target' with no specific number, emphasizing the current focus is on capturing lost opportunities by resolving capacity constraints in Terminal 2.

Pablo Monsivais asked how traffic at the new Tulum airport is performing against expectations and inquired about the nature of discussions with U.S. carriers regarding their 2025 plans.

Answer

Adolfo Castro Rivas reported that Tulum Airport's traffic is in line with expectations, forecasting 1.35 million passengers for the full year. Regarding U.S. carriers, he noted that while some face aircraft shortages, conversations are positive, and they anticipate a strong winter season.

Pablo Monsivais from Barclays asked about the extent of the authorized tariff increase that has been implemented, the timeline for future adjustments, and whether airlines have shown increased resistance to these changes.

Answer

CFO Saúl Villarreal stated that the first tariff increase was implemented in March 2025, with another expected in early 2026, while a 2025 adjustment is being cautiously evaluated. CEO Raúl Revuelta Musalem added that airline feedback has been 'business as usual' and consistent with past negotiations.

Pablo Monsivais of Barclays PLC followed up on tariff implementation, asking for the expected timeline of future increases for modeling purposes and confirming the drivers behind the recent hike.

Answer

Executive Raul Musalem clarified that no further tariff changes are expected in 2025. The next increase is planned for the first quarter of 2026, contingent on market conditions like inflation and the exchange rate. He confirmed the March 1, 2025 increase was approximately 15% compared to December 2024 levels, reflecting inflation and reduced discounts.

Pablo Monsivais of Barclays asked if commercial revenues at Guadalajara Airport have normalized for 2025 or if there is still potential upside, and also requested an update on the Turks and Caicos acquisition process.

Answer

Executive Raul Musalem indicated potential upside for Guadalajara's commercial revenue, dependent on the international traffic mix and the maturation of new businesses like the hotel and cargo facility, which will have easier year-over-year comparisons. On the Turks and Caicos tender, he noted the government has again delayed the decision, which is now anticipated around March, but remains uncertain.

Pablo Monsivais from Barclays asked if soft economic activity in Mexico was affecting domestic demand and requested color on pricing dynamics and sensitivity between the leisure and VFR travel segments.

Answer

President & CEO Enrique Javier Beltranena Mejicano highlighted positive macro indicators like strong FDI and recovering remittances. EVP Holger Blankenstein noted two key trends in the domestic market: high base fare elasticity for advance bookings and robust close-in bookings for the summer, supported by resilient ancillary sales. The CEO added that strong operational execution is a key driver of performance.

Pablo Monsivais of Barclays PLC followed up on demand, asking about the impact of soft economic activity in Mexico on the domestic market. He also requested color on domestic pricing dynamics, particularly price sensitivity between leisure and VFR travelers.

Answer

President & CEO Enrique Javier Beltranena Mejicano highlighted positive macroeconomic signals like strong foreign direct investment and recovering remittances. EVP Holger Blankenstein added that in the domestic market, Volaris observes significant base fare elasticity for far-out bookings and robust close-in bookings for the high season, complemented by resilient ancillary sales.

Pablo Monsivais requested a historical example of Volaris adapting to a VFR downturn by shifting to other markets. He also asked for more detail on the 2025 CapEx plan and working capital needs.

Answer

President and CEO Enrique Beltranena cited the H1N1 crisis, the COVID-19 pandemic, and the first Trump administration period as examples of rapid VFR traffic recovery. Chief Financial Officer Jaime Pous specified the $250 million CapEx is mainly for major maintenance events and that the company is focused on preserving cash without plans for new debt for working capital.

Pablo Monsivais asked about the impact of U.S. carriers reducing capacity on LATAM's international routes and requested color on demand for transatlantic routes by point of sale.

Answer

CEO Roberto Alvo Milosawlewitsch explained that the Southern Cone is less exposed to U.S. traffic dynamics and that the Delta JV provides diversification. He described transatlantic demand as strong and stable from both European and South American points of sale over the last two years.

Pablo Monsivais asked about the current demand trends between corporate and leisure segments and how a potential merger of Gol and Azul might impact LATAM's corporate market share in Brazil.

Answer

CEO Roberto Alvo Milosawlewitsch stated that the demand mix has been stable, with both corporate and leisure segments showing healthy trends. He highlighted that LATAM's focus on on-time performance and product enhancements helped it achieve a 40.8% corporate revenue share in Brazil in 2024. He reiterated that it is too early to speculate on the potential impacts of a competitor merger.

Asked about the current demand mix between corporate and leisure travel and whether the potential merger of Gol and Azul could lead to an increase in LATAM's corporate market share in Brazil.

Answer

The demand mix between corporate and leisure has been stable, with both segments performing well. The company has significantly grown its corporate share in Brazil to its highest level since 2013. It is too early to speculate on the potential impacts of a competitor merger, as details are not yet available.