Grupo Aeroméxico, S.A.B. de C.V. (AERO) Earnings

Management highlights

### Overall Financial Performance - Total Q2 2026 revenue hit a record $1.5 billion, representing 30% year-over-year growth, in line with management guidance. Total revenue per available seat mile (TRASM) increased 10.5% year-over-year, while passenger revenue per available seat mile (PRASM) rose 10% year-over-year. - Adjusted EBITDA reached $260 million with an 18% margin, and operating income reached $68 million with a 5% margin; both results fell within the guided range, and would have hit the upper end of the range if fuel prices had matched initial guidance assumptions. - Fuel costs were $220 million higher year-over-year, $30 million above initial Q2 guidance assumptions. Management exceeded its 50% incremental fuel cost recapture target, achieving a 76% recapture rate. ### Operational Highlights - Total capacity (ASMs) increased 2% year-over-year, in line with guidance. Capacity adjustments were concentrated in the domestic market to offset temporary World Cup-related demand drops, while international capacity continued to grow. - Launched two new long-haul routes (Mexico City to Barcelona, Monterrey to Paris) that started strong, and operated multiple charter flights to transport national soccer teams for the World Cup. - Led all global full-service carriers in on-time performance as of end-Q2, putting the airline on track to be named the world's most on-time airline for the third consecutive year, a feat no other carrier has achieved. - Opened new premium lounges and improved check-in facilities at Mexico City International Airport, and launched the new Aeromexico Imbursa cobrand credit card program to strengthen the loyalty ecosystem. - Ended Q2 with a strong liquidity position: over $1 billion in cash, total liquidity above $1.2 billion including a fully undrawn $200 million revolving credit facility. Generated $362 million in operating cash flow, reduced total debt by $70 million, and ended the quarter with adjusted net debt below year-ago levels. ### Strategic Priorities - Maintains a focus on disciplined capacity management, investment in customer experience, and growing premium revenue to drive sustainable long-term value. - Leverages operational flexibility to quickly adjust to changing market conditions, which management cites as a core competitive advantage.

Guidance

- **Third Quarter 2026**: Total revenue is expected between $1.59 billion and $1.62 billion, with an adjusted EBITDA margin in the mid to high 20% range, and an operating margin in the mid-teens. Absolute results are expected to be broadly in line with 2025 levels, while operating margins are expected to be modestly lower than 2025's exceptionally strong results, as higher fuel costs are mostly offset by higher revenue. - **Fourth Quarter 2026**: Capacity is expected to grow 6.5-8% year-over-year, reaching high single-digit growth as planned. Total revenue is expected to grow 14.5-16.5% year-over-year, with an adjusted EBITDA margin of 28-31% and an operating margin of 15.5-18.5%. Operating leverage from increased fleet utilization is expected to drive improved unit costs and margin expansion. - **Full Year 2026**: ASM growth is expected to be 2-3% year-over-year, total revenue growth is expected to be 13-14% year-over-year, with an adjusted EBITDA margin of 20.5-26.5% and an operating margin of 11-13% (low double-digit range, as projected earlier by management). Both full-year EBITDA and EBIT are expected to grow 9% and 11% year-over-year, respectively. - Management reaffirmed confidence in meeting guidance, noting healthy booking trends for the second half and operational flexibility to adjust capacity if market conditions change.

Segment performance

The call does not break out financial performance into separate formal product segments with distinct absolute revenue figures and contribution percentages. Key segment-level performance highlights are as follows: Premium passenger segment accounted for 43% of total passenger revenue, marking a 1 percentage point year-over-year increase and a 17 percentage point increase compared to 2019, the highest premium mix in Aeromexico's history. 39% of total passengers participated in the Aeromexico Rewards loyalty program, an increase of 7 percentage points year-over-year. Domestic market experienced temporary demand moderation in June due to World Cup-related travel shifts, but recovered quickly post-World Cup, with full Q2 domestic revenue still hitting a record. International market delivered consistent strong demand and pricing growth, driving most of the year-over-year TRASM improvement, and was unaffected by the World Cup.

Risks & headwinds

- Volatility in jet fuel prices remains a core headwind; while management has demonstrated the ability to recapture most incremental fuel costs via pricing adjustments, sustained unexpected price increases could pressure margins if demand softens and full recapture is not possible. - Persistent strength of the Mexican Peso increases non-fuel operating costs, particularly for peso-denominated expenses. Inflationary pressure on wages also contributes to higher non-fuel costs. - Uncertainty around the pending approval of a competitor's merger transaction creates uncertainty for the domestic competitive landscape, though management notes it is focused on strengthening its own product offering regardless of the outcome. - Ongoing labor negotiations with the flight attendant union (ASA) have a deadline of July 30 for individual member voting on a tentative agreement; while management is confident a deal will be reached, a breakdown in negotiations could create operational risk. - Divergent capacity adjustments from domestic competitors introduce potential pricing pressure and competitive uncertainty in the domestic market.

Analyst Q&A

• Q: What was the net impact of the 2026 World Cup on Q2 2026 revenues, and where do management see demand improvement in the second half between domestic and international markets? /

  A: Management estimates $24 million in domestic corporate revenue was lost in June due to World Cup-related travel shifts, partially offset by positive revenue from World Cup charter flights, resulting in a small net negative impact for the month. Despite this, June and Q2 2026 posted record total revenues. International demand has remained strong and was unaffected by the World Cup, while domestic demand has already recovered quickly in July, with solid bookings for August and September confirming the impact was strictly temporary. International pricing adjusted immediately to higher jet fuel prices after the Middle East conflict began, while domestic pricing adjusted more slowly; management expects domestic yields to rise to fully reflect fuel costs in the second half, driving overall strong second half revenue. /

• Q: How many additional slots will Aeromexico gain from the Mexico City International Airport hourly capacity increase from 44 to 46 starting in the next IATA winter season, and what will the additional slots be used for? /

  A: The overall airport hourly capacity increase is 2 additional operations per hour, which translates to 10 additional slot pairs for Aeromexico, consistent with Aeromexico's existing slot share at the airport. The additional slots will be used to add new wide-body long-haul international capacity, as well as restore domestic capacity that was temporarily reduced during Q2 2026 to offset lower demand and high fuel prices. /

• Q: What drove the recent increase in other revenue, and is this increase a one-time effect or the new sustainable run rate? /

  A: The increase is a result of multiple ongoing growth initiatives, not a one-time out-of-period gain. It reflects higher Aeromexico Rewards revenue from growing program penetration, revenue from newly remodeled and reopened VIP lounges (which had no revenue in the year-ago quarter), revenue from World Cup charters, and growth from ancillary airline retailing initiatives including car rentals, travel insurance, and vacation packages. It also includes initial revenue from the newly launched Imbursa cobrand credit card, making this a structural upward shift rather than a one-time gain. /

• Q: What is the Q2 2026 fuel recapture rate, and what is expected for the second half of 2026? How does increased fleet utilization impact ex-fuel costs and margins in the second half guidance? /

  A: Management exceeded its initial 50% recapture target for Q2 incremental fuel costs, achieving a 76% recapture rate. Because much of Q2 capacity was sold before fuel prices rose, full recapture of incremental fuel costs could not happen in Q2; management expects to recapture more than 100% of the remaining unrecovered Q2 fuel cost in the second half, which is already reflected in the current guidance. For the margin impact of higher fleet utilization, all fixed aircraft ownership costs are already reflected in the P&L; increasing utilization to add more capacity generates additional high-margin revenue without proportional increases in fixed costs, creating significant operating leverage that will drive margin expansion in Q4 2026 and beyond. Aeromexico will not need to hire additional crews for Q4 2026 growth, further amplifying the margin benefit.