• Total Operating Revenues: $678 million, a 12% decrease year over year.
• EBITDAR: $203 million, down 14% year over year, with a margin of 29.9%.
• Net Loss: $51 million, translating into a loss per ADS of $0.045.
• ASM Growth: 6% increase versus the first quarter of 2024.
• Load Factor: 85.4%, down 1.6% compared to the prior year.
• TRASM: $0.078, a 17% decline year over year.
• CASM: $0.0788, a 3% decrease year over year.
• CASM ex Fuel: $0.054, up 5% year over year.
• Average Economic Fuel Cost: $2.63 per gallon, a 13% decline.
• Ancillary Revenue per Passenger: $53, marking a 7% year-over-year decline.
• Total Liquidity Position: $862 million, representing 28% of the last two months' total operating revenues.
• Net Debt to EBITDAR Ratio: 2.7 times at the first quarter end.
• Fleet Size: 145 aircraft with an average age of 6.4 years.
• On-Time Performance: 83.8%.
• Scheduled Completion Rate: 99.6%.
• Net Promoter Score: 39, one of the highest quarterly scores in the company's history.

• Warning! GuruFocus has detected 4 Warning Signs with VLRS.

Release Date: April 28, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Controladora Vuela Compania de Aviacion SAB de CV (NYSE:VLRS) maintained a high load factor of 89% in the Mexican domestic market, demonstrating strong demand.
• Ancillary revenues accounted for over 50% of total quarterly revenue, highlighting the effectiveness of their diversified revenue model.
• The company achieved an on-time performance of 83.8% and a scheduled completion rate of 99.6%, indicating strong operational efficiency.
• Volaris launched a new app to enhance passenger experience and increase direct sales, reducing dependency on third-party channels.
• The company signed a new code share agreement with Copa Airlines, expanding connectivity between Mexico and Latin America.

Negative Points

• Total operating revenues decreased by 12% year over year, impacted by the depreciation of the Mexican peso against the US dollar.
• The company experienced a 17% decline in quarterly TRASM, reflecting challenges in maintaining revenue per available seat mile.
• First-quarter EBIT was a loss of $10 million, with a margin of minus 1.5%, indicating financial pressure.
• The company revised its full-year ASM growth target from 13%-15% to 8%-9%, reflecting a cautious approach to capacity deployment.
• Geopolitical dynamics and economic uncertainty have created challenges in forecasting and reaffirming full-year EBITDAR guidance.

Q & A Highlights

Q: With RASM down 17% and guidance suggesting further declines, are you seeing the expected consumer response to fare reductions? What gives you confidence in a rebound in the second half of 2025? A: Holger Blankenstein, Executive Vice President, noted that while the second quarter benefits from the Easter shift, external forces are impacting demand. Despite low fares, they expect a rebound in the second half, driven by VFR traffic, which typically increases during high seasons like summer.

Q: Given the geopolitical uncertainties and share price levels, are share buybacks being considered? A: Jaime Esteban Pous Fernandez, CFO, stated that the priority is cash preservation, maintaining a strong balance sheet, and reducing debt. Share buybacks are not currently planned.

Q: Can you provide insights into monthly RASM trends and any signs of stabilization in domestic demand? A: Holger Blankenstein explained that March was weak due to the absence of Easter and spring break effects, but April showed improvement. They are monitoring indicators closely and have adjusted capacity for the second quarter, with optimism for a recovery in the third quarter.

Q: How does the new code share with Copa Airlines affect your Central American operations? A: Holger Blankenstein stated that the partnership is a bilateral code share, enhancing connectivity between South America, Central America, and Mexico, without changing their Central American operations, which focus on VFR traffic.

Q: What are the expectations for capacity growth in 2026, considering potential demand recovery or prolonged downturns? A: Enrique Beltranena, CEO, emphasized focusing on current capacity management, projecting low single-digit growth for the next year, while remaining adaptable to demand changes.

Q: How is the competitive capacity environment in the domestic market? Are peers deploying capacity rationally? A: Holger Blankenstein observed capacity moderation from domestic and international peers, supporting a TRASM recovery, with expectations for continued rational capacity deployment.

Q: How do you plan to manage redelivery costs, and when will they normalize? A: Jaime Esteban Pous Fernandez explained that redelivery costs will remain high in 2025, start decreasing in 2026, and normalize by 2027, with adjustments made to fleet plans to manage capacity.

Q: How is leisure demand performing compared to VFR demand, and what factors impacted first-quarter yields? A: Holger Blankenstein noted strong leisure demand, particularly for domestic beach travel, while VFR is most affected. First-quarter TRASM was impacted by a 20% peso depreciation, with a 7% decline in constant currency.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.