Controladora Vuela Compania de Aviacion, S.A.B. de C.V.

decrease in 2024, with a full year down 13%. Domestic capacity was significantly impacted, declining by 22% in 2024. Although it is projected to increase in 2025, it will remain around 10% below 2023 levels. Mexico to the US is the strongest performing region for Volaris with a 16% growth in 2024 and rational growth projected into 2025. Other regions like Mexico to Central America and Central America to the US and intra-Central America were highly volatile through much of 2024 but we are seeing good yields following rationalized capacity and are monitoring the Central American market for additional opportunities. Importantly, we now continue to evolve our network. In 2024, we optimized slot availability at Mexico City International Airport and strategically shifted capacity from the domestic market to the U.S. market following Mexico's Category 1 upgrade. At the end of 2024, about 40% of our capacity was in the international market. We recently launched new routes for sale covering core domestic cities as well as routes to California and Texas. We remain focused on flying in profitable markets and continue to leverage our entire network. For the quarter, our ASMs were down only 5% versus the fourth quarter of 2023, which included the first groundings of GTF-related aircraft. We delivered an outstanding schedule during the peak holiday season despite severe weather in Chicago and Tijuana, registering a 99.2% schedule completion. On-time performance within 15 minutes was 82.2%, up nearly 8 percentage points from last year. In the fourth quarter, we restarted growth of our presence in core Volaris markets of Guadalajara and Tijuana with additional frequencies in those profitable markets. We also improved connectivity between our core markets and the city of Monterey. During the quarter, We started to observe changes in booking conditions following the United States presidential elections, which we believe is driven by the incoming administration's migration and protectionist rhetoric. We adjusted fares accordingly, sustaining strong loads. Our total load factor for the fourth quarter was 87.3%, down just 0.8 percentage points compared to the prior year. with our domestic and international load factors in line with last year's results. Given the deceleration in base fares, our overall chasm of 9.3 cents came in weaker than expected. However, this result was bolstered significantly by ancillary sales, which were a record $57 per passenger for the quarter, demonstrating strong execution of our ULCC model. As you know, around 40% of our route network faces no air competition and on those routes we compete solely against buses. Bus switching remains integral to our core strategy and will continue to be a key focus. However, customers are no longer choosing Volaris based only on our low fares. They are actively engaging with our digital platforms, joining our affinity programs and strengthening their loyalty with each repeated purchase. Capturing and capitalizing on this recurring demand is essential to differentiating our business. In 2025, Volaris will introduce several significant innovations to enhance our ancillary strategy. As we had previously shared, we are planning to bundle our four core ancillary offerings into a single affinity portfolio to drive greater ancillary penetration and value for our customers. These affinity programs have demonstrated strong momentum. Annual path grew 68% year over year in 2024. VPath solidified its position as an innovative subscription model. V Club membership expanded to 1.3 million active members and now represents one of the most important loyalty programs in the region. Our co-branded credit card now has almost 1 million active cardholders. All in all, we now have a significant amount of customers in our affinity programs. an important building block to generating more recurring revenue streams and increased purchasing frequency of our passengers. We believe our affinity programs will solidify Volaris as a leader for value-seeking passengers, including frequent flyers, corporates, and small and medium businesses, in addition to our VFR and leisure base. In tandem, we are upgrading Yavas, our dedicated vacation business to have similarly broader appeal to hire ticket passengers. To further enhance customer experience, Volaris is preparing to launch a new mobile app in the coming weeks, reinforcing our commitment to digital innovation and customer engagement. The new app will significantly improve the customer experience, streamlining personalized bookings boarding, access to affinity programs, and self-service. Built with the latest advancement in software development, it provides greater flexibility to adapt to future updates. Overall, Volaris continues to enhance its distribution strategy, increasing the share of direct digital channel sales across our website, mobile app, call centers, and airport sales. In 2024, we relaunched our co-chair agreement with Frontier and launched a new co-chair with Iberia Airlines. The co-chair with Frontier now accounts for approximately two percentage points of our cross-border load factors. Volaris will continue exploring further opportunities on alliances without sacrificing the core of our ULTC model. Turning now to our commercial outlook for 2025. As Enrique noted, we have adjusted base fares in the first quarter in response to softness in US VFR traffic, which we believe is influenced by geopolitical uncertainty. We expect that this is a temporary market condition and will continue monitoring demand patterns closely, just as we did at the start of the first Trump administration. The first quarter of this year will face a challenging year-over-year comparison due to exceptional results in the first quarter of 2024 when substantial capacity came out of the Mexican domestic market due to Pratt & Whitney engine inspections and the Boeing MAX 9 groundings. We expect to return to a usual first quarter seasonality followed by a stronger second half. Additionally, the shift of Easter into the second quarter will further impact our results. Now I will turn the call over to Jaime to walk through our fourth quarter and full year financial results.

Thank you, Holger. Our full year 2024 financial results demonstrated the effective execution of our GTIF engine inspections mitigation plan and the resiliency of our business. We focus on controlling costs in 2024 while increasing profitability. For the year, we achieved 13% EBIT margin and 36% EBITDA margin, delivered a 126 million net profit, reduced our net debt to EBITDA ratio to 2.6 times, generated over 300 million in operating cash flow, and grew our year-ending liquidity position to $954 million. Despite temporary cost pressures associated with the ending inspections, we maintained one of the lowest gas emissions globally. Notably, at the beginning of the year, one of our capacity reduction scenarios projected an 18% decrease in ASMG over a year. However, the actual reduction was 13%, reflecting a 5 percentage point improvement due to our fleet mitigation plan. I will talk more about the steps we are taking to drive similar outcomes in 2025. But first, let me walk through the results for the fourth quarter and full year 2024. Compared to the same period last year, our fourth quarter 2024 results were as follows. Total operating revenues were $835 million, a 7% decline, giving fewer ASMs and software unit revenues, attributable to the factors already described. Top-line results were also impacted by the 20% depreciation of the Mexican peso against the U.S. dollar. We continue to manage our FX exposure by targeting collection of approximately 50% in U.S. dollars. Moving on to cost, CASM increased by 3%, to 8.04 cents, while Casomex fuel rose by 17% to 5.68 cents. Meanwhile, our average economic fuel cost dropped 20% to $2.51 per gallon. Additionally, we saw cost benefits from the weaker vessel. Unit costs remain under temporary pressure due to aircraft groundings, high in number of maintenance events, and re-delivery expenses. We expect delivery accruals and related maintenance will impact 2025 with a one-time cost of approximately $100 million. This will result in an estimated 0.3% impact on Casumix Fuel during the year. I want to highlight that strong labor relations continue to differentiate Volaris from many global airlines. We executed a revised three-year contract with our labor union that contemplates annual salary and benefit increases that keep pace with national inflation in Mexican pesos. Returning to the P&L, for the fourth quarter, in the other operating income line, we booked sale and leaseback gains of $13.6 million related to the delivery of four aircraft. As a reminder, this line also includes aircraft rounding compensation from Pratt & Whitney. EBIT for the quarter total, $117 million, down 29%, given software unit revenue and a tough comparison to our record quarterly EBIT of $164 million in the fourth quarter of 2023. EBIT margin was 14%, down 4.2 percentage points. Meanwhile, EBITR came in at $331 million. This represented an 18% increase EBITDA margin was 39.6% or 8 percentage points higher and in line with guidance. Finally, net income was 46 million profit, translating to earnings per ADS of 40 cents. Moving briefly to our P&L for the full year 2024 compared to 2023, Total operating income revenues were 3.1 billion, only a 4% decrease despite Volaris flying 13% fewer ASMs during the year. Custom was 8.03 cents, a 3% increase, with average economic fuel costs falling by 12% to 2.75 per gallon. Custom mix fuel was 5.40 cents, 12% higher. EBIT was $413 million, up from $223 million, with an EBIT margin of 13.2% or 6 percentage points higher. EBITDA total $1.1 billion, a 39% increase, with a full-year EBITDA margin of 36.3%, an increase of 11 percentage points, and also in line with guidance. Net income was $126 million, compared to an $8 million profit. Earnings translated into $1.10 per ADS. Turning now to cash flow and balance sheet data, for the fourth quarter, cash flow provided by operating activities was $308 million, our highest ever quarterly generation. Cash outflows using investing and financing activities were $85 million and $98 million, respectively. Meanwhile, our CAPEX, excluding finance fleet pre-delivery payments, totaled $160 million for the quarter and $350 million for the full year. CAPEX was driven by spare engine purchases and maintenance. With our spare engine supply in good shape heading into 2025, we expect CAPEX, excluding finance PVPs, to go down by around $100 million for this year as we don't expect to buy more engines. Volaris ended 2024 with a total liquidity position of 954 million, compared to 789 million at 2023 end. This figure represented 30% of 2024 total operating revenues. As of December 31st, our net debt to EBITDA ratio stood at 2.6 times compared to 3.3 times at the end of 2023. From our balance sheet perspective, Volaris maintains a well-structured debt profile that supports both financial stability and long-term growth. Our total debt stands at $3.9 billion, primarily composed of lease liabilities and credit lines strategically allocated for engine and fleet requirements. Within this structure, financial debt totals $800 million, including $320 million in engine financing and $361 million in PDP financial needs, reinforcing our disciplined approach to fleet modernization and operational resilience. Polaris secured around $300 million in new PDP credit lines, guaranteeing contractual airport deliveries until 2028. This reflects lenders' confidence in our long-term business, despite the near-term challenges we have faced. As of December 31st, our total fleet consisted of 143 aircraft, up from 129 a year ago, with an average age of 6.4 years. We incorporated six aircraft into our fleet during the quarter. Now, I would like to provide updates on Pratt & Whitney. Due to engine inspections, we had an average of 34 aircraft on ground during the fourth quarter and 32 aircraft on ground during full year 2024. In 2025, our capacity growth will be driven by new deliveries and by the increase of our productive fleet as engines return from the shops. Importantly, as these engines are reincorporated, this road will not add new depth to our balance sheets. Looking ahead, we have renegotiated our free delivery schedule with Airbus, more evenly distributing and postponing aircraft deliveries to conclude in 2031. Factoring in aircraft deliveries, returns, extensions, and the return of inspected engines, we project that this new schedule will support a rational ASM growth from 2025 to 2031. All of the engine inspections and repairs that Pratt & Whitney completed during 2023 and 2024 comply with the airworthiness directive regarding powder metal. Nevertheless, some of these engines will require a second shop visit in the next 18 to 24 months to install full life parts. Finally, turning to guidance, on our outlook for the full year and first quarter of 2025, we want to comment that since mid-January we have seen weakness in VFR demand for travel between the U.S. and Mexico. We assume this will be a short-term headwind as Mexico and the U.S. negotiate a resolution to these issues around the border. However, we are currently hearing heightened concerns from our passengers as they try to understand the new immigration and travel controls that could be implemented by the new administration in the U.S. As for the full year 2025, we currently expect an emitter margin of 34 to 36%, ASM growth of around 13%, which is at the lower end of our previous guidance range. This is light reduction. It's also a result of recent discussions we have had with Nervos on potential delivery delays and with Pratt & Whitney on the return to service of engines. We also think this slight low ASM growth is appropriate given the weakness in cross-border BFR demand I mentioned. We will continue to work with both ERBOS and PRACT in these issues and will closely monitor demand patterns and may have to make further adjustments to the network as the year progresses. It is also important to say that we remain positive about the course of the bilateral relationship, which means there could be upside to our full year guidance. Finally, we expect CAPEX net of finance fleet re-delivery payments of around 250 million. CAPEX will primarily encompass maintenance and re-delivery expenses. Our full-year 2025 outlook assumes an average foreign exchange rate of 21 to 21.2 Mexican pesos per U.S. dollar, We also assume an average U.S. Gulf Coast jet fuel price of $2.15 to $2.25 per gallon. Moving on to our first quarter 2025 guidance, note that it reflects several factors, including the shift of Easter back into the second quarter, the continued weakened peso, and a return to historical first quarter seasonal demand. For the first quarter, we are expecting ASM growth of around 7%, trust between 7.9 and 8 cents, driven by software U.S. to Mexico demand, given the border issue resulting from the new U.S. administration noted above, and a cash on ex-fuel to be in the range of 5.5 to 5.6 cents. In all, we expect a first quarter EBITDA margin of around 28 to 29 percent. First quarter 2025 outlook assumes an average foreign exchange rate of 20.6 to 20.8 Mexican pesos per U.S. dollar and an average U.S. Gulf Coast Jailfield price of 225 to 235 dollars per gallon. In closing, Two years ago, we committed to doubling revenues, EVITAR, and free cash flow by 2025 compared to 2019. Despite these unexpected headwinds associated with engine inspections and airbus delays, I want to reaffirm this commitment, which demonstrates our strong focus on both profitability and cash generation. Now, I will turn the call back over to Enrique for closing remarks.

Thank you, Jaime. Over the past 18 months, Key United Airlines leaders have speculated about the survival of the low-cost carrier business model. I want to emphasize, Volaris' position as an ultra-low-cost carrier in Mexico is unique. As the largest airline in Mexico by passenger volume, We enjoy a robust domestic market share and ultra-low-cost carriers represent over 70% of the passenger domestic market and we both hold a cost leadership over legacy carriers. Moreover, Mexico's distinct ability to convert bus passengers and recurring travelers has driven growth in the country's emerging air travel market in the last 15 years. We continue to see plenty of runway for this secular trend. Having said that, we believe there are some truths in the U.S. leaders' philosophies about what makes a superior model airline. We agree that strategic evolution and operational changes to keep up with industry trends do not happen overnight. You have heard us for several years preach rational and prudent capacity growth. We agree that the health and profitability of the industry are dependent on rational capacity deployment. We have emphasized this principle and we enhance our focus on profitable growth for our business. We agree that airlines should operate where they have a competitive advantage. Volaris has built a strong network in markets where we are the leading airline. Lastly, we agree that cost convergence threatens U.S. carriers that were built to compete primarily with price. But Volaris is highly differentiated in that we can compete both with low fares and high value. We offer low fares. We operate an attractive and reliable schedule, but we provide relevant ancillary options that enhance the travel experience. Thank you very much for listening, operator. Please open the line for questions.