Rogério Araújo

Rogerio Araujo of Bank of America questioned the fuel price assumption in the company's guidance, asking if it was conservative, and inquired about the expected trend for CASM ex-fuel for the rest of the year and into 2026.

Answer

CFO Peter Donkersloot explained the $2.45/gallon fuel assumption was based on the curve when guidance was built and is not updated daily. He reaffirmed the full-year CASM ex-fuel target of $0.58, expecting it to be flat through year-end, and noted that H2 2025 RASM is expected to be similar to H2 2024, in line with guidance.

Rogério Araújo questioned the fuel price guidance of $2.40 per gallon, suggesting it was above the current curve, and asked about potential margin upside. He also inquired about the dividend policy and the possibility of further shareholder returns.

Answer

CFO Peter Donkersloot Ponce defended the fuel guidance as prudent and consistent with their overall margin outlook. CEO Pedro Heilbron acknowledged potential upside if current prices hold. Regarding returns, management confirmed the dividend is based on a policy of paying ~40% of the prior year's net income and that about $110 million remains on an existing share buyback plan.

Rogério Araújo sought confirmation on whether the guidance assumes a full year of Venezuela flight restrictions, asked about the yield comparison basis for 2024, and inquired about potential yield upside if operations resume.

Answer

CFO Jose Montero clarified the 2024 guidance includes the Venezuela impact from late July onward, while the 2025 preliminary guidance assumes the capacity is deployed regardless of a restart. He noted that second-half 2024 yields were also affected by currency fluctuations, particularly in Brazil. CEO Pedro Heilbron added that while a restart in Venezuela is unpredictable, he is confident it will happen, likely at some point in 2025, which could present an upside.

Rogerio Araujo of Bank of America requested preliminary ASM growth expectations for 2026 and 2027, and asked what Volaris's profit margin would be in a theoretical scenario without the ongoing aircraft groundings.

Answer

EVP Holger Blankenstein provided a preliminary 2026 ASM growth target of mid-single digits, with a flexibility of plus or minus three percentage points. CFO Jaime Esteban Pous Fernández estimated that in a normalized scenario without groundings, the EBIT margin would be 2.5 percentage points higher and the net margin would be 3 percentage points higher.

Rogerio Araujo from Bank of America requested preliminary ASM growth expectations for 2026 and 2027. He also asked what Volaris's margins might look like in a normalized operational environment without the impact of grounded aircraft.

Answer

Holger Blankenstein, EVP, provided a preliminary 2026 ASM growth target of mid-single digits, with flexibility of plus or minus three percentage points. CFO Jaime Esteban Pous Fernández estimated that in a normalized scenario without groundings, the EBIT margin would be approximately 2.5 percentage points higher, and the net margin would be about 3 percentage points higher.

Rogério Araújo raised concerns about the weak Q2 margin guidance, potential overcapacity in Mexico, the impact of returning grounded aircraft, and the timeline for normalizing high aircraft redelivery costs.

Answer

President and CEO Enrique Beltranena withdrew full-year EBITDA guidance due to uncertainty but stressed that significant capacity cuts are intended to improve TRASM. He also noted redelivery costs will remain high in 2025, lower in 2026, and normalize by 2028. Airline Executive Vice President Holger Blankenstein added that the fleet plan has already been adjusted to manage the return of grounded aircraft.

Rogério Araújo inquired about the primary factors that led to margins exceeding guidance and their sustainability, and also requested an update on the expected timing for the Pratt & Whitney engine recalls.

Answer

CFO Jaime Pous attributed the margin beat to favorable fuel prices and stronger-than-budgeted TRASM. CEO Enrique Beltranena reported significant progress on engine repairs, with turnaround times improving from around 350 days to closer to 300 days, providing a solid and reliable outlook for redeliveries.

Inquired about Q2 liquidity, specifically an update on a potential government credit line, the status of the TAP bond, and how the company is addressing the anti-dilution clause related to its equity offering.

Answer

Q2 is typically a good quarter for cash flow. A government credit line (FGE) has passed initial approvals and is expected to be fully approved soon, providing significant liquidity. The TAP bond is expected to be repaid at maturity, with discussions ongoing. The company acknowledged the anti-dilution clause was 'not helpful' and is in constant conversation with bondholders to find a better approach for further deleveraging.

Asked if the new share count includes a future $200M offer, requested details on the management incentive plan's potential dilution, and sought clarification on the 'commercial agreements' related to a note haircut.

Answer

The share count does not include the future $200M offer. A new management incentive plan could lead to up to 10-11% dilution, with terms yet to be finalized. The note haircut involved cash payments and settling commercial items like maintenance reserves or securing future aircraft deliveries with lessors, all validated as contributing to required cash flow improvements.