Controladora Vuela Compañía de Aviación SAB de CV Q1 FY2025 earnings call

• Geopolitical Impact: Ongoing volatility between the U.S. and Mexico created uncertainty, affecting consumer bookings. Volaris adjusted capacity to align with evolving behavior.
• Load Factors: Consolidated load factor 85%, domestic VFR at 89%, international U.S. transborder slightly lower. Proactive pricing strategies maintained load factors.
• Profitability: Q1 EBITDA margin within expectations. Ancillary revenue over 50% of total revenue, supporting diversified revenue model.
• Operational Performance: On-time performance 83.8%, scheduled completion rate 99.6%, Net Promoter Score 39%. Navigated Pratt & Whitney engine challenges with proactive management.
• Capacity Adjustments: Revised full-year ASM growth to 8%-9% from 13%-15% due to geopolitical and economic uncertainty, focusing on customer demand and profitability.

For the first quarter of 2025, Volaris' total operating revenues were $678 million, a 12% decrease year-over-year. Consolidated load factors were 85%, with domestic VFR traffic driving a load factor of 89%. International U.S. transborder load factor was slightly below the prior year. Ancillary revenue accounted for over 50% of total quarterly revenue, with average ancillary revenues per passenger reaching $53, marking the sixth consecutive quarter above $50.

• Full-year 2025: ASM growth revised to 8%-9% from 13%-15%. CapEx net of finance fleet predelivery payments approximately $250 million.
• Second Quarter 2025: Expected ASM increase 9%-10%, TRASM between $0.074-$0.075, CASM ex-fuel $0.057-$0.058, EBITDA margin 24%-25%. Assumes average FX MXN20.20-MXN20.40 per USD and fuel price $2-$2.10 per gallon.

• Geopolitical Volatility: Uncertainty in border policies, tariffs, and economic conditions impacting consumer bookings.
• Pratt & Whitney Engine Challenges: Ongoing impact on aircraft availability, managed but still a risk.
• Currency Fluctuations: 20% depreciation of MXN against USD affecting revenue.

Q: Michael Linenberg from Deutsche Bank asked about TRASM decline and confidence in consumer bounce back.

A: Holger Blankenstein responded that the second quarter has Easter benefit but is impacted by external forces, and confidence in summer recovery due to VFR traffic bounce back.

Q: Stephen Trent from Citi asked about share repurchases and fuel pricing.

A: Enrique Beltranena mentioned cash preservation priority and fuel pricing varies by airport (e.g., Tijuana, Guadalajara more expensive).

Q: Duane Pfennigwerth with Evercore ISI asked about monthly trends and domestic market stabilization.

A: Holger Blankenstein said March was weak, April better, monitoring indicators for recovery.

Q: Rogerio Araujo with Bank of America asked about EBITDA margin expectations and redelivery costs.

A: Enrique Beltranena stated 2025 redelivery costs high, normalizing from 2026, and capacity adjusted to match demand.

Q: Jens Spiess with Morgan Stanley asked about capacity reduction and redelivery expenses.

A: Holger Blankenstein said 5 aircraft redelivered in 2025, redelivery expenses impact, and capacity reduction to improve TRASM.

Q: Guilherme Mendes with JPMorgan asked about leisure demand and yield breakdown.

A: Holger Blankenstein said leisure demand strong, VFR most affected, TRASM impacted by peso depreciation and other factors.

Q: Pablo Monsivais with Barclays asked about VFR demand adaptation and CapEx.

A: Enrique Beltranena mentioned past examples of VFR recovery, Jaime Pous said CapEx $250M for major maintenance and IT.

Q: Alberto Valerio with UBS asked about airport negotiations and Mexico City Airport slots.

A: Holger Blankenstein said advocating for reasonable airport fees, ongoing discussions for slot allocation