Grupo Aeromexico - Earnings Call - Q1 2024

Transcript

Operator (participant)

Good afternoon and welcome to Aeroméxico's first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session at the end of the presentation. Questions can be submitted via the webcast at any time during the call using the Ask a Question section on the webcast. As a reminder, today's conference call is being recorded. Now, I would like to turn the call over to Ms. Lucero Medina, Head of Investor Relations. Ms. Medina, you may begin.

Lucero Medina (Head of Investor Relations)

Good afternoon and thank you for joining. We are conducting this call to present our first quarter 2024 results as part of the commitments from our successful restructuring process. The company has used the U.S. dollar as the presentation currency for its consolidated financial statements, which is also the functional currency of the group. All figures are expressed in U.S. dollars unless otherwise indicated. Reference is made to the confidentiality provision set forth in Section 2J of the Registration Rights Agreement entered into on March 17, 2022, by and among Grupo Aeroméxico and the holders. All information disclosed during the call and included in the secure site is considered confidential and shall be subject to such confidentiality provision. Speaking on the call today are Andrés Conesa, our Chief Executive Officer, and Ricardo Sánchez Baker, our Chief Financial Officer.

Our CEO will open the call, providing insight into the company's performance and results, and Ricardo, our CFO, will then address our quarterly revenue, cost, and cash flow performance. Please note that we are not providing guidance nor forward-looking statements regarding future events, market, or economic trends to Aeroméxico's future financial performance. Our presentation and the Ask a Question section following this call will be limited to these quarterly results. Due to applicable regulations, we are unable to provide any insight or address any topics beyond the historical aspect of our quarterly results. Now, I'll turn the call over to Andrés.

Andrés Conesa (CEO)

Thank you, Lucero, and good morning and good afternoon, everyone, and thank you for joining our call today. Following a very successful 2023, I am pleased to present some remarkable achievements for the first quarter of 2024. Historically, first quarters tend to be placed on the shoulder season. However, this year, we have witnessed exceptionally robust performance during the period, setting new records for our company's first quarter results. Moreover, our operational excellence has been duly acknowledged, further highlighting our commitment to delivering exceptional service to our clients. In the first quarter of this year, we transported six million clients, which is a 3.9% increase compared to the first quarter of 2023. Our load factor increased by 5.3 percentage points from 80.1 in the first quarter of 2023 to 85.4 in the first quarter of this year. We transported 22% more clients in international markets.

Our operations in North America increased by 19% to 8,800 operations, while our flights to Europe were 20% above 2023, totaling 1,300 flights during the first quarter of 2024. In this first quarter, our total ASKs increased by 10% as compared to last year's first quarter. We reduced our domestic ASKs by 9%, primarily driven by the grounding of our 737 MAX 9 fleet, and increased our international ASKs by 22%. Despite the MAX 9 fleet grounding for several weeks, we managed to rebook most of our passengers while we executed the revision following Boeing and FAA's approved guidelines. We were able to resume operations shortly and managed to avoid a significant impact in our financial performance. First quarter profitability metrics mark unprecedented achievements for our first quarter performance. EBITDA in 1Q24 was $365 million with a 28% margin.

EBITDA improved by $162 million versus the same period of last year, and operating income in the first quarter of 2024 amounted to $202 million with a 16% margin, which is a $133 million improvement compared to the first quarter of last year. We accomplished this solid financial performance while upholding our standards of operational excellence. According to Cirium, Aeroméxico was the world's most on-time airline in February with a 99.8 completion factor, and as well in April with a 99.7 completion factor. These achievements truly showcase the dedication and commitment of our entire team. I am deeply grateful to each member of our organization for their valuable contributions. We remain committed to investing in our fleet, ensuring the utmost standards of innovation and safety. In the first quarter of this year, we received two Boeing 737 MAX aircraft, and this month, we welcomed one additional Boeing 787-9.

The average fleet age was 8.3 years as of March 31 of 2024. Having a modern fleet enables us to securely facilitate connections between Mexico and the world while minimizing environmental impact and ensuring extraordinary experiences for our clients. Our business momentum continues to strengthen steadily. Our primary focus remains on achieving outstanding reliability, enhancing customer experience, and optimizing efficiency throughout the company to bolster financial results. With this, I will now hand the call over to Ricardo to discuss financials. Thank you very much for joining the call.

Ricardo Sánchez Baker (CFO)

Thank you, Andrés, and good afternoon, everyone. It is my pleasure to announce that our first quarter results maintain the positive trend that we witnessed through 2023. Total revenue in the first quarter increased by 27%, from $1 billion to $1.3 billion. Revenue per ASM, or RASM, was $0.153, a 15% increase as compared to the first quarter of 2023. Domestic passenger revenue increased by 26%, while international passenger revenue increased by 29%. In this quarter, we maintained the ability to expand unit revenues even after a 10% volume growth. Total operating expenses in the first quarter amounted to $1.1 billion, a 15% increase as compared to the first quarter of last year. Total cost per ASM in the first quarter was $0.129 and $0.09 excluding fuel. These figures represent increases of 4% and 14% respectively.

Our non-fuel CASM increased mainly as a result of higher labor costs driven by the Mexican peso appreciation against the U.S. dollar, inflationary pressures, and changes in Mexican labor laws. EBITDA reached $365 million with a 28% margin. This is a $162 million increase as compared to the first quarter of 2023, and the highest EBITDA margin that we have recorded in a first quarter. Operating profit for the quarter amounted to $202 million with a 16% margin, also our highest per quarter record today. Net income for the first quarter recorded $104 million as compared to a $28 million loss in 1Q of 2023. Our capacity to generate cash flow remained strong. During the first quarter of 2024, we generated $277 million of net cash flow from operating activities.

Thanks to this robust cash flow generation, we were able to sustain our investment and deleveraging initiatives besides strengthening our financial position. During the first quarter, the company amortized $67 million of financial debt. As a result, the total adjusted net debt to EBITDA ratio improved to 1.5 times compared to 1.7 times at the end of 2023. Aeroméxico's cash position as of March 31 amounted to $955 million. Amortization of financial debt since the emergence of Chapter 11 in March 2022 has totaled almost $660 million at the end of the first quarter of this year. In the first quarter of 2024, we received two Boeing 737 MAX aircraft and finished the quarter with 144 operating aircraft, including 20 Boeing 787s, 87 737s, of which 53 are MAX aircraft and 37 Embraer E190s. We are very satisfied with these record financial results.

We remain committed to keep enhancing our revenue premium through operational excellence and improved product offerings while maintaining our cost discipline. This will continue to strengthen our position as a best-in-class airline in the global industry. With this, I conclude my remarks. Thank you very much for joining our call, and we can now move forward to the Q&A section. Thanks.

Operator (participant)

Just as a reminder, if you would like to submit questions, you could refer to the Ask a Question text box on your webcast player. Thank you. At this time, there are no questions. This does conclude today's teleconference. You may disconnect at this time. Thank you for your participation and enjoy the rest of your day.