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spk04: Good morning, everyone. Thank you for standing by. Welcome to the Velaris First Quarter 2024 Financial Results Conference call. All lines are in a listen-only mode. Following the company's presentation, we will open the call for your questions. Please note that we are recording this event. This event is also being broadcast via live webcast and can be accessed through the Velaris website. At this point, I would like to turn the call over to Ricardo Martinez, Investor Relations Director. Please go ahead, Ricardo.
spk06: Good morning, and thank you for joining the call. With us is our President and CEO, Enrique Beltranena, our Airline Executive Vice President, Holger Blankesten, and our Chief Financial Officer, Jaime Poz. They will be discussing the company's first quarter 2024 results. Afterward, we will move on to your questions. Please note that this call is for investors and analysts only. Before we begin, please remember that this call may include forward-looking statements within the meaning of applicable securities laws. Forward-looking statements are subject to several factors that could cause the company's results to differ materially from expectations, as described in the company's filings with the United States SEC and the Mexico CNBB. These statements speak only as of the day they are made, and Volaris undertakes no obligation to update or modify any forward-looking statement. As in our earnings pre-release, our numbers are in US dollars compared to the first quarter of 2023, unless otherwise noted. And with that, I will turn the call over to Enrique.
spk07: Good morning everyone and thank you for joining us today. I am proud to start by saying our Volaris team delivers strong first quarter results. It was certainly a challenging quarter as we ramped up the engine accelerated inspection processes that drove challenges in delivering a good schedule, but I'm proud that the team was able to execute on our plans so well. Over the last six months, Our primary focus has been directing operations to enhance our customer service, managing ongoing changes to the schedule as the fleet plan changes, and continuing our emphasis on obsessive cost control. Despite the ongoing challenges with engine and aircraft issues, we continue to execute well and remain focused on delivering shareholder value. During the first quarter, we undertook preventive accelerating inspections resulting in the grounding of approximately 60 engines for which we received prearranged compensation from Pratt & Whitney. We'll continue to look for ways to mitigate the impact of these engine removals and we'll continue to work closely with Pratt to accelerate the required work on the new engine. However, despite Pratt & Whitney's optimistic discourse on enhancing MRO capacity and availability of materials and spare parts, Volaris remains skeptical about tangible progress in these areas. While engine removals to date have gone accordingly to schedule, and aircraft on ground during the quarry were consistent with the plan, we are being conservative in our expectations for when engines will return into service. Even with all this complexity, we have been able to drive strong results through nimble planning, a flexible network, and our ability to make rapid strategic adjustments, we generated a strong increase in TRASM and ancillaries while costs remained controlled. As a result, we achieved net profitability in the first quarter, posting a 33 million net income. This marks a significant achievement, as historically, due to seasonality, our first quarter has resulted in net losses. The last time we recorded a net profit in the first quarter was back in 2019. As we execute our strategy, we continue to prioritize profitability when allocating capacity. On last quarter's call, we outlined three core pillars for navigating the current environment. One, protecting our fleet and capacity. two, optimizing our network and driving profitability, and three, elevating the passenger experience and cultivating talent for our future growth. Volaris continues to deliver against each of these pillars, and our strategy has proven effective and is bearing fruit. Now, let's review how we closed the quarter. Total operating revenue grew 5%, with unit revenue rising 21%, Our ASMs contracted 13% due to engine accelerated inspections, which was better than our prior guidance of 16 to 18%. This improvement of our guidance is mainly driven by the timing of aircraft deliveries. EBIT and EBITDA margins were 14 and 31% respectively. expanding by 18 and 14 percentage points as compared to the prior year, respectively, and ahead of our expectations. As capacity returns to our fleet, we are committed to being prudent and rational with our growth, again prioritizing profitability based on current planning for engine shop visits we expect to fully recover 2023 capacity levels by the end of 2025. In the first quarter, we received two new A321neos from Airbus ahead of schedule, both of which had engines with full-life engine disks. The timing of these additional capacities enabled us to incrementally capture robust demand from Mexico's Holy Week and Easter. With the rationalization of Mexican capacity and the restoration of FAA Category 1 status, we have implemented a completely new base schedule that delivers a more consistent and reliable itinerary. The changes to the network were necessary given we had to reduce operations at Mexico City International Airport to 43 slots per hour and we needed to develop better recovery in the schedule given ongoing engine challenges. Additionally, we reallocated significant capacity from the Mexican domestic market to U.S.-Mexico routes while preserving our position in core domestic markets. This strategy shift enables us to prioritize routes that should have stronger unit revenues while managing a network with reduced ASMs and no growth. In addition, we're working to reactivate and grow our culture with Frontier, which will drive incremental market opportunities, but we don't expect to see any impact until late summer. Overall, we're pleased with our business performance at this capacity levels despite increased unit costs due to reduced ASMs. Our team will remain focused on executing our operational plans. We will continue to focus on managing capacity, driving unit revenues, delivering margin expansion, strict cost control, being conservative with debt, and achieving results that are in line with our guidance. For years, we have been discussing building an airline with cost discipline, the ability to execute as planned and the flexibility to adjust as needed. Today, Volaris is delivering results and we are confident we can continue to do so in a consistent basis. With that, I'll now turn the call over to Holger to discuss the quarter's commercial trends and operating performance.
spk09: Thank you and good morning. In the first quarter, Volaris experienced robust demand, especially in the domestic market, with March showing significant outperformance. Although we expected some traffic shifts from the second quarter, given that Easter occurred in the final week of March, we are also happy with last-minute bookings. Our capacity reduction was less than expected, at around minus 13%, instead of the guided minus 16 to minus 18%. This was because Airbus delivered two new AC21 Neos earlier than planned. Additionally, high aircraft utilization also boosted ASMs per departure for the quarter. This additional capacity enabled us to meet demand and dilute fixed costs. Regarding network breakdown, ASMs were 27% lower in the domestic market, and we increased capacity by 17% in the international market, resulting in a network-wide ASM decline of minus 13%. Taking advantage of the restoration of FAA Category 1, we continue to reallocate capacity to northbound routes, which are undergoing a maturity process in preparation for the peak summer season while simultaneously right-sizing our domestic core markets. Therefore, the international load factor dropped four points to 82%, and the domestic markets load factor was strong at 91%, up six points over the prior year period for a healthy load factor result of 87% for the overall network. During the remainder of 2024, We will be cautious and will not introduce too much capacity to any individual route. While the earlier than expected arrival of the two AC21 NEOs provides incremental ASMs for the full year, we still expect a capacity reduction of 16% to 18% for 2024. And we are trending toward the upper end of that range, so we are closer to minus 16% change versus 2023. Meanwhile, we continue to redeploy significant capacity into the US market, and we expect it will constitute around 45% of our network this year, compared to roughly 30% historically. We are currently in ramp-up phase of much of this additional capacity, but continue to see progress in attractive markets like Los Angeles, the Bay Area, Chicago, and Texas. In Central America, We are reducing the number of aircraft allocated to the market from 9 to 6 due to our lack of aircraft availability. Trasm improved to 9.34 cents, up 21%. This result was primarily driven by a focus on serving the most profitable routes in the domestic market, reducing capacity in underperforming routes, and by robust growth in ancillaries. International TRASM remains solid despite a 17% capacity increase. As customers increasingly embrace the Volaris ultra low cost model, they are more frequently purchasing ancillary services. Total ancillaries per pack rose to a historically high record of $57 from the previous record of $55 for the fourth quarter of 2023. In the first quarter, ancillary revenues represented 51% of total operating revenues, in line with our goal of having them represent half of total operating revenues. These ancillary purchasing patterns are promising, as we simultaneously see strong base fare trends. Our average base fare stood at $54, reflecting a 15% increase. On recurring revenue, our goal is to build B-Club membership to compose about a third of our total sales in the medium term. Additionally, in the near term, we expect to promote greater affinity with our core customers as we refine the Volaris mobile app and other digital assets, which will catalyze higher direct sales, better product customization, booking flexibility, and more options for our customers. Passenger satisfaction is crucial to our success. Polaris achieved a net promoter score of 32% in the first quarter, a positive result despite recent engine-related route reductions and cancellations. Our customer service team is working hard to communicate with passengers and reschedule bookings, while our operation team is performing well under the circumstances. On-time performance for the quarter was 82.8%, with a scheduled completion of 99.3% and utilization of 5.2 segments per aircraft per day. I want to reiterate our focus on good labor relations. We successfully agreed the 2024 Union Agreement, a key enabler of widening our cost advantage versus North American ULCCs and legacy US airlines. Maintaining strong labor relations and a stable workforce, even during periods of industry disruption, is essential to our operations and financial strategy and positioning our business for long-term growth. Looking forward, we have noted the reduced demand for April as Easter was celebrated in the first quarter. That said, we are observing healthy spring and summer booking trends. We are closely monitoring pricing and load factors to optimize yields. Our forecast indicates a further increase in second quarter bookings as we enter the peak season. It is important to note that while we're experiencing strong demand and positive travel trends, particularly in the domestic market, we are also navigating the challenges caused by the accelerated engine inspection process while managing our capacity. In summary, we are well positioned for a positive 2024 driven by cost discipline, improved travel through better fare, strong ancillary performance, increased loads, and our robust network. This upward trajectory, which started in the fourth quarter of 2023, is already evident. Booking trends indicate continued favorable performance in the months ahead, aligning with our 2024 guidance. I will now turn the call over to Jaime to discuss our financial performance.
spk08: Thank you, Holger. Positive trust on trends and a strict cost control define our first quarter 2024 financial results. When combined with solid traffic, pattern winning compensation, and diligent execution, we generated net profitability in the quarter. This is a notable accomplishment for the first quarter, as historically, first quarters due to seasonality have resulted in net losses. These first quarter results encourage us to revise upward our full year 2024 guidance. However, our execution plan for the year remains aligned with our initial outlook. I will provide a more detailed discussion of our updated guidance shortly. Let me start by walking through our performance in the first quarter of 2024 compared to the same period last year. Total operating revenues were $768 million, a 5% increase notwithstanding the 13% year-over-year reduction in capacity due to the strong demand and total revenue per pack's improvement. Gasomix fuel result came in better than guidance at 5.16 cents, an increase of 11% against the first quarter of last year. The improvement was driven by the re-measurement of previously booked delivery accruals, which reflect nine lease extensions for EFRA for yearly due for delivery in 2025 and 26. Nonetheless, as discussed in our previous call, there was substantial cost pressure from the engine-related AOEs and the effect of a larger proportion of international capacity, particularly with higher landing and navigation fees in the United States. We booked sale on leaseback gains of $9.7 million in the other operating income line, and the remeasurement related to lease extensions generated a 41 million benefit in the aircraft viable lease expenses line. Meanwhile, total COSM was relatively flat year over year at 8.08 cents due to lower fuel expenses in the period. Our average economic fuel cost fell by 13% to $3.01 per gallon. EBIT totaled 104 million compared to a 31 million loss in the first quarter of 2023. This reflected a stronger TRASM, the benefit from aircraft lease extensions, and lower fuel costs, resulting in a margin of 14% and an 18 percentage point increase. E-VTAR total $235 million, a 91% increase, while E-VTAR margin was 31%, an improvement of 13 percentage points. It is important to note that both EVIT and EVITAR include price compensation, as well as expense from leases of the entire fleet, including aircraft on ground. Net income rose year over year to 33 million, translating into earnings per ADS of 29 cents. The cash flow provided by operating activities in the first quarter was 245 million. The cash outflows used in investing and financing activities were 97 million and 171 million respectively. In the first quarter, our CapEx excluding fleet pre-delivery payments totaled 83 million, primarily driven by acquiring additional spare engines. These investments are crucial for maintaining business continuity and minimizing disruption to our core operations. As a result, we now expect capital expenditures to be 400 million for the full year 2024 versus an original CapEx forecast of 300 million. ended the quarter with a total liquidity position of $768 million, representing 23% of the last 12 months total operating revenues. Our net debt to EBITDA ratio decreased to 3.1 times from 3.8 times at the end of the first quarter of 2023 and 3.3 times at year end of 2023. We expect to further the leverage by the end of the year. Volaris has low and manageable refinancing exposures in the short to medium term. Most of our financial debts, short-term maturities, are associated with pre-delivery payments, thus not posing a refinancing risk, given that we have already signed signal leasebacks for the aircraft that will be delivered over the next 18 months. We continue to be conservative with our balance sheets. As of March 31st, our fleet consisted of 134 aircraft, up from 129 aircraft at the end of the year. Seeds per departure were 197, and our fleet had an average age of 5.9 years. We confirmed our medium-term aircraft delivery schedule with Airbus and expect 21 additional aircraft deliveries by the end of 2025, all with PDP financing and St. Elizabeth commitments. Turning now to guidance, We are pleased with our first quarter results and market trends continue encouraging. However, industry conditions remain fluid. While we acknowledge macroeconomic and geopolitical uncertainties, we are cautiously optimistic about the year. For the second quarter of 2024, we expect an ASM reduction of approximately 18% year-over-year, trasm of 9.1 to 9.2 cents, Custom X fuel to be in the range of 5.5 to 5.6 cents. Please note that primary cost of the custom X fuel increase is the capacity reduction and the specific fixed costs linked to the groundless fleet, which are not fully compensated by pattern width. Finally, we expect an EBITDA margin between 31 and 33%. For the full year 2024, our latest guidance is as follows. We continue to expect an ASM reduction of 16% to 18% year-over-year, EBITDA margin in the range of 32% to 34% compared to our initial outlook of 31% to 33% given enhanced profitability in the first quarter. CAPEX net of finance fleet delivery payments of $400 million driven by our purchases of spare engines. Our second quarter and full year 2024 outlook assumes an average exchange rate of 17.3 to 17.5 Mexican pesos per U.S. dollar, and an average U.S. Gulf Coast jet fuel price of 2.6 to 2.7 dollars per gallon. We will continue to make decisions appropriate to increase profitability, preserve business continuity, and create shareholder value. Now I will turn the call back to Enrique for closing remarks.
spk07: Thank you, Jaime. We will continue to execute and deliver on every facet of our plan as we move through 2024. We will remain flexible, adjusting for volatility and capitalizing on opportunities as necessary to drive profitability. Before proceeding to the Q&A session, I'd like to highlight the upcoming significant political campaign in Mexico over the next few months. While we anticipate minimal changes to aviation policies, The primary uncertainty revolves around the development of aviation policies for managing metropolitan area airports. Thank you very much for listening. Operator, please open the line for questions.
spk04: Certainly. Thank you. The floor is now open for questions. If you have a question, please dial star 11 on your telephone at this time or any time. If at any point your question is answered, you may remove yourself from the queue by pressing the pound key. Questions will be taken in the order they are received. We ask that when you post your question, you pick up your handset to provide optimum sound quality. Those following the presentation via the webcast may post their questions on the platform. The management team will answer them during the call, or the Valeris Investor Relations team will follow up after the conference call is finished. To send your questions via the webcast platform, click on the ask a question button and type your inquiry. Please hold while we poll for questions. And our first question will come from Dwayne Finningworth of Evercore ISI, your line is open.
spk05: Hi, thank you, good morning. On GTF, I wonder have you gotten any engines back yet and how did those turn times uh, compare with your expectations? Um, are you seeing parts being prioritized, uh, for grounded aircraft, uh, versus new deliveries? And, you know, can you just elaborate on, on spare engine availability? Was this availability that came up as a function of your negotiations and hence, you know, and hence the higher capex?
spk07: Yes, uh, Duane, good morning. Um, so, um, We continue seeing progress and as RTX reported this morning, they are probably in the highest peak of engines in terms of maintenance because obviously the bulletin was issued in January and basically all these engines are removed now and in the process of being repaired. The issue here is how fast are inducting the engines into shop a and b once they are in shop are they really being inducted or they stay from patio waiting for spare parts and materials and the reason we're skeptical a on the turnaround times and b in in in the speed that they can process this is because we have not seen a the inductions at the level they have promised And B, that they really start working on the engines once they have them in the shops. We have not received any powder metal engine back from the shops. I mean, we have received other engines that were repaired for other reasons. The turnaround time has been about 310 days. And I think that's it. That's all you asked, which was a lot.
spk05: Sorry for the multi-part question there, but I guess when would you expect for the engines that went in for this specific issue? Is it basically a year from January, so early 2025, when you'll begin to kind of measure that turn time, or is it sooner?
spk07: I think we're talking now more or less about 350 days or a little bit more. We delivered the first nine engines before September 15, so we think it's going to be somewhere in the fourth quarter of this year.
spk05: Okay, great. And then just maybe an easier one. How should we be thinking about the Easter shift impact? I know that can be more of an elongated peak leisure demand period in Mexico. So how do you think about the Easter shift impact to the March quarter and to the June quarter?
spk09: Yeah, this is Holger. Duane, good morning. Well, clearly the Easter shift helped the first quarter. We saw a great Trasm versus other quarters in previous years. There was one week of the Easter high season that fell into the March quarter and one into the June quarter. So we are going to see in April partially also good results on Trasm and then the June quarter will have some effect and we are currently guiding to 9.2 cents on the June quarter in terms of TRASM.
spk11: Okay, thank you very much.
spk04: And one moment for our next question. Our next question will be coming from Stephen Trent of Citi. Stephen, your line is open.
spk00: Good morning, everyone, and thanks very much for taking my question. Can you hear me okay, by the way? Hello? Yes, we can hear you perfectly. Great. Okay. Thank you for that. My phone's actually a little funny here. Just a question about, you know, how very strong you guys have been on the unit revenue side. I've gotten client inbounds looking at you guys and wondering why some of your competitors are floundering in Latin America. Is it fair to say that, one, some of those competitors are more focused on beach destinations and you're not, and two, you guys are generating a lot more revenue outside of basic economy versus some of your competitors. I just wanted to make sure I'm thinking about that fairly and start from my phone.
spk09: Well, clearly, a couple of things. This is Holger, by the way. Stephen, good morning. A couple of things explain the travel increase in the first quarter. First and foremost, obviously, we had a significant decrease in capacity across the entire domestic market because of the Pratt & Whitney groundings. And also, you might recall that Aeromexico had some issues with the Boeing 737 MAX in January, which led to a capacity shrinkage in the domestic market, and that clearly helped. We trimmed our network focusing on the least profitable markets, and that helped push unit revenue. Second, I would characterize the market as quite rational, both in capacity and pricing in domestic market and also in our international routes. And we've been working very diligently on generating or taking advantage of this capacity reduction and generating good loads, good fares, and good ancillaries. The shift towards the international market and the capacity expansion we did in the international market clearly helped our ancillary revenue performance and unit revenue. And then we already discussed this, Stephen. The fourth element here is clearly the peak holy season Easter week, which occurred in the first quarter, which is December. not typical that has fallen into the first quarter. So I think all these factors combined led to our strong traveling performance in the first quarter.
spk00: Great. Appreciate that, Holger. And just a very quick follow-up. I believe you guys mentioned $57 per passenger in ancillary revenue. You know, broadly thinking, as we look down the line a year or two from now, You know, could we conceivably see some upside on that number, assuming FX neutrality between now and then?
spk09: Yes, clearly we are continuously executing our ancillary strategy. We believe that there is upside driven also by a shift to international markets and the higher ancillary for passengers that international passengers buy. But we're also executing on other things, new products, better pricing, better personalization, more recurring revenue streams. So, yes, we believe there's upside in ancillary for passengers.
spk00: Okay, super. Thanks, Holger. Thanks, guys.
spk04: And one moment for our next question. And our next question will be coming from Michael Linenberg of Deutsche Bank. Your line is open, Michael.
spk01: Oh, yeah. Hey, good morning, everyone. Just a quick question here. Jaime, you may have said the number. What are the number of aircraft that are now grounded due to the GTF issue? And where does that number peak out for the year? Hi, Michael.
spk08: This is Jaime. The average number of aircraft that we had grounded during the first quarter was 29, Michael. I think the peak, we're going to experience the peak in the third Q and the beginning of the third Q for this year. How much will be it? How much is thank you? The peak is going to be on the third Q and the fourth Q. Michael, I think you better see this because there are engines coming up and coming down. Think about reduction in ASMs. instead of aircraft on ground, we will be provided the average planes at the end of each quarter, but consider that guidance of reducing 16 to 18% capacity, the flight forward of the engines that we expect to be OG during the year.
spk01: Okay. Okay. My second question is when we look at the operating gain that you, the other operating expense or credit that you took in the quarter, how many airplanes or engines are underlying that? And this is more of a modeling question. How does that number, what does that number look as we move through the year? Is that the high, it seems like that that would be the high point and that number would come down dramatically based on your deliveries for the year. Is that right?
spk08: Okay, I'm going to talk about two lines. Michael, first on the other operating income line, remember what we are including in that line is same-land leaseback gains. This quarter reflects the same-land leaseback gains of A321's NILS and also PLAT compensation. When you move to viable lease expenses, which are basically re-deliveries, there's where we have a one-time effect for the re-deliveries, extensions of the 2025 aircraft and one 2026 aircraft that is going to come back to the normal number of that. We had also that benefit in the first queue, but going forward, since we are not expecting to make decisions on extending any more aircrafts, it should be stabilized to historically numbers, Michael.
spk07: Okay, that's helpful then. Thank you. Michael, if I may, I think it's important, I mean, to give some color to this whole thing of Pratt. I mean, the first thing is this is a quarter which I think it's spectacular in terms of TRASM because Pratt doesn't compensate anything on revenues, okay? So I think that's really important to be considered, okay? So the performance there at the revenue line is real, okay? And very, very driven by the market capacity and the way we are managing our TRASM factors, okay? The second point, which is really important, is despite we did really well on the revenue, on the CASM, things are going to get more and more complicated exactly because of what you're asking. Towards the third quarter, we have the largest amount of engines in repair, okay? So it is important that I don't want you guys to get bullish with the results of the first quarter because we remain skeptical on what is coming in terms of engines during the next couple of quarters.
spk11: Now that's very helpful.
spk04: And one moment for our next question. And our next question will be coming from Rogerio Aruja of Bank of America. Your line is open.
spk12: Yeah, hi, guys. Thanks very much for the opportunity. Congratulations on the strong results. A couple here on my side. First, is there any way we can think about the net impact of the engine recall. So what I mean is, if we take into consideration the compensation this quarter, but also these economies of scale that Volaris is facing and the higher tourism that the lower flight frequencies are giving you, is this positive or negative to EBITDA and margins in our view? And anything you can Any caller can give on that. It would be extremely helpful. The idea here is to think how recurring these stronger margins are for upcoming years. Thank you.
spk08: Hi, Roger. This is Jaime. I will say that you should think that this quarter was really everything about TRASM. Pratt compensation doesn't compensate for revenue loss. We have 29 aircraft on ground, and we were able to fully compensate the revenue loss of those aircraft by our own, and our work and network, and all the strategies that Enrique and Jorge have been talking about since the last quarter. What the only thing that is helping is is custom because basically I'm getting compensated for the rents of the fleet that are grounded But I'm not getting fully compensated for all of the direct costs from the grounded fleet So I think in general the price equation is negative for the entire business And basically we are having a plant in order to mitigate the consequences of it I think if I want to add some color to that I think that
spk07: the TRASM improvement will continue as much as everybody continues being careful with the capacity that they inject into the market, especially once the capacity is starting to come back. We in Volaris are absolutely careful and very, very detailed in the way we will reassume the capacity into the market, and we don't want to create a problem, A, on capacity or B, on pricing.
spk12: Okay, this is very clear and helpful. Thank you. Another very quick question here is on this extension of aircraft lease contracts. This has been supporting the variable lease expenses line in the past couple of quarters. Should we expect further positive impacts in upcoming quarters, or that was it? Thank you. You should not expect that, Ruiar. Okay, perfect. Thank you very much.
spk04: And one moment for our next question. And our next question will be coming from Helene Becker of TD Cohen. Your line is open. Again, Helene Becker of TD Cohen.
spk10: Your line is open. And I'm moving forward to the next question.
spk04: And our next question will be coming from Goharmi Mendez of JPMorgan. Your line is open.
spk13: Good morning. Good afternoon, everyone. I'm Heike Holger. I'm Jaime Ricardo. Thanks for taking my question. I have a follow-up question on the competitive environment.
spk07: Can you speak up?
spk11: We can barely hear you.
spk13: Hello?
spk11: Yeah, go ahead.
spk13: Sorry, can you hear me better now?
spk11: Yes.
spk13: Okay, sorry about that. My question is on Henrique's point about competitors adding capacity in a conservative way. How overall have you been seeing the competitive environment in Mexico and assuming that VIVA will start to ground more capacity more towards the second half of the year? So do you see some kind of pressure at some point in time, or the base case is for all the competitors to continue to be rational? Thank you.
spk09: As I mentioned earlier, this is Holder. Good morning. We are currently seeing a pretty rational environment in the domestic market with rational capacity allocation into the key markets, a reduction of capacity in Mexico City International Airport due to the slot situation, and a good pricing environment. We are also adding more capacity and shifting capacity from the domestic market to the international market, capacity ramp up, which should ramp up fully towards the high season of June, July. And we are cautiously optimistic about that capacity getting to its full potential this year. As you might recall, we have shifted 17% of the capacity to the US markets in the first quarter.
spk10: I'm detecting no audio. Moving forward.
spk04: Our next question will be coming again. It's a follow-up from Helaine Becker of TD Cohen. Your line is open.
spk02: Hi, thanks very much, operator. Can you hear me now?
spk09: Yes, we can, Helene. Good morning.
spk02: Oh, good morning. Sorry, I don't really know what happened there. But thanks for the time. So here's my question. In terms of looking ahead to the second half of the year, as you think about aircraft on the ground, how are you thinking about capacity and new aircraft coming in? I mean, I know you took two in the quarter that just ended, but have you been, have they talked, has Airbus talked to you about when the next set of aircraft will come in?
spk11: Hi Elaine, this is Jaime.
spk08: We have a still from the Airbus purchase order a total of 10 additional aircraft to be delivered during 2024. So far, we expect that the efforts are going to be delivered within a month in advance or a month in delay with what Airbus is telling us, and that's included in the ASM guidance for the year that we have. It includes what we expect to be coming out because of the engines and new aircraft mitigation plan extensions, and those all be key in the ASM capacity guidance of 16% to 18% reduction during the year length.
spk02: Okay, that's very helpful. Thank you. And then just on the cash balances is I think 23% of LTM revenue, I want to say I thought I read somewhere. What's your goal for that? Like, I think in the past, it was as high as 30%. Plus, where is where's your, like, sweet spot for that?
spk08: Our goal, Elaine, is to maintain it within 25 and 30. Right now, because of what happened in particular in the third key of last year and the AOGs, we had some impact of last year. But ideally, our goal and our budget is to maintain it between 25 and 30.
spk02: Okay. Thank you very much. And sorry about the question. Thank you.
spk04: And one moment for our next question. And our next question will be coming from Fernanda Rishia of BTG. Your line's open.
spk03: Hi, thank you for taking my question and congrats on the result. Two questions on our end. The first is we heard some rumors about a possible category one downgrade from FAA. So just wanted to hear your most updated view on this matter. And second, given the volatility in oil and effect that we are seeing, just wondering how we should think about your head strategy on both things going forward. Thank you.
spk08: This is Jaime. We have not heard the rumor, and we don't have any indication that a new downgrade will take place for Mexico. So you can take that away from your mind. In particular with hedging, we don't have any hedging for fuel or effects. We don't plan to do it for the first of the year. Very important on terms of effects to consider that we have a natural hedge and we have an important portion of our revenue coming in U.S. dollars, plus all of our cash is 90% investing in dollars.
spk03: Perfect. Thank you very much. Have a nice day.
spk04: And excuse me, this concludes today's question and answer session. I would now like to invite Mr. Beltrana Nina to proceed with his closing remarks. Please go ahead.
spk07: Hey, I just wanted to thank you everybody for being in the call and for your very interesting questions. I think that, again, it was a quarter which was driven by execution. And I think, again, I want to remind everybody the effort we did at the revenue line. As always, I would like to thank you, our family of ambassadors, the board of directors, you investors, bankers, lessors, and suppliers for their commitment and support. I look forward to addressing you all again on the next call. And I will be visiting New York, Boston, and Chicago in the next quarter, so I might see everybody there.
spk04: And this concludes the Volaris conference call for today. Thank you very much for your participation and have a nice day.
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