Controladora Vuela Compania de Aviacion Q1 Earnings Call Highlights

Key Points

• Volaris posted higher traffic and revenue (TRASM +11%, operating revenue +14% to $770M) but a Q1 net loss of $71M and an EBITDA margin about two percentage points below guidance due to steeply higher fuel costs.
• Management has accelerated pricing and ancillaries—about a 10% base fare increase and ancillaries now roughly 57% of total operating revenues—and expects to recapture ~20–30% of incremental fuel costs in Q2 with TRASM seen up ~22% YoY.
• Volaris cut capacity and trimmed full-year ASM guidance to ~4% from 7% (Q2 ASM 0–2%), is actively managing grounded aircraft amid Pratt & Whitney GTF repairs, and holds about $767M of liquidity while pursuing a smaller, more fuel‑efficient fleet to lower lease liabilities.

Controladora Vuela Compania de Aviacion NYSE: VLRS executives told investors the company is entering 2026 focused on “disciplined growth,” revenue quality improvements, and active fleet management during peak Pratt & Whitney GTF engine repairs, while preserving its low-cost operating model. Management emphasized flexibility in both capacity and costs as fuel prices rose and geopolitical uncertainty increased late in the quarter.

First-quarter results: higher revenue, fuel-driven margin pressure

CEO Enrique Beltranena said Volaris delivered “a resilient performance supported by disciplined capacity deployment, improving yields and mix, and cost control,” despite “steeply higher fuel prices.”

For the first quarter, Beltranena reported TRASM of $0.0862, up 11% year-over-year, supported by a 10% increase in base fare and improving revenue mix. He also said ancillary revenue represented 57% of total operating revenues.

CFO Jaime Pous said total operating revenues rose 14% to $770 million, achieved with 2.3% ASM growth (below the company’s earlier 3% capacity growth expectation). He attributed some of the year-over-year revenue performance to a strengthened peso, which appreciated 14% and benefited the translation of domestic revenues into U.S. dollars, while also creating a headwind on peso-denominated costs.

On profitability, Beltranena said EBITDA margin was 22.9%, which came “two percentage points below” the company’s first-quarter guidance due to fuel. Pous said average economic fuel costs rose 16% year-over-year to $3.06 per gallon, while realized Gulf Coast jet fuel averaged $2.56 per gallon versus the $2.20 assumption embedded in guidance.

Pous reported EBITDAR of $177 million with a 22.9% margin, while EBIT was negative $21 million (a -2.8% margin). Net loss for the quarter was $71 million, or a loss per ADS of $0.62.

Pricing and ancillaries: fare actions and “faster than historical” fuel recapture

Beltranena said the company has been “actively accelerating pricing actions,” producing about 10% fare improvement across the network and “about 20% increases in selected ancillary products.” He said Volaris expects TRASM to increase about 22% year-over-year in the second quarter.

Beltranena added that the company expects to recapture, on average, approximately 20% to 30% of incremental fuel costs in the second quarter, noting that demand has remained resilient and that the airline is seeing a “faster than historical ability to recapture fuel through pricing, supported by a more disciplined industry environment.”

During Q&A, Airline EVP Holger Blankenstein said demand remained strong in both domestic and international markets “despite a $4 fuel per gallon and price adjustments,” and that fuel recapture has been “a little bit better in the international market.” He also cited a “trade down effect” in transborder markets, with customers shifting from higher-fare carriers toward Volaris’ lower base fare and unbundled model.

Blankenstein highlighted continued ancillary momentum, saying ancillary revenue per passenger rose 8% year-over-year and that ancillary revenue was 57% of total revenues. He cited customer segmentation, credit card revenue, and the Ya Vas vacation package business as drivers. Blankenstein also said the Altitude loyalty program has more than one million active members and remains on track to integrate with the co-branded credit card by the end of the quarter.

Capacity shifts and updated outlook amid fuel volatility

Management described active capacity adjustments aimed at preserving cash and aligning flying with demand and fuel conditions. Beltranena said the company is prioritizing “profitable flying” and maintaining flexibility to adjust capacity, with actions “primarily focused on the domestic market as international markets continue to demonstrate stronger pricing absorption.” He said schedules are being managed through a rolling six- to eight-week planning horizon.

For full-year 2026, Beltranena said Volaris now expects ASM growth of approximately 4%, reduced from prior guidance of around 7%.

Blankenstein said the company has made tactical reductions mainly through frequency optimizations in off-peak periods without canceling routes. He said Volaris reduced schedules for April and May, implementing approximately two percentage points of reductions in April and nine percentage points in May, and that the airline is prepared to implement further reductions for June and the second half if needed. In response to an analyst question, Blankenstein provided a second-quarter split: domestic capacity down about 3% year-over-year and international capacity up mid- to high-single digits.

Pous said Volaris is suspending its full-year 2026 guidance due to jet fuel price volatility and limited visibility tied to geopolitics, and will provide an update when conditions stabilize. However, he provided directional commentary on ASM growth (now ~4%) and said the company is implementing deferrals of non-critical investments to preserve cash.

For the second quarter of 2026, Pous guided to:

• ASM growth of 0% to 2% year-over-year
• TRASM of around $0.095
• CASM ex-fuel of approximately $0.068
• EBITDA margin of around 13%

Pous said the second quarter should represent the “peak” in CASM ex-fuel for the year, driven by non-recurring items and capacity reductions. He cited major fleet-related expenses, including major maintenance events on four aircraft and an increase in engine shop visits to 43 events in the second quarter compared to 15 last year, reflecting accelerated engine inductions into Pratt & Whitney shops to reduce aircraft-on-ground levels.

Fleet, liquidity, and GTF engine recovery efforts

Volaris ended the quarter with cash and liquidity around $767 million, which management said represented roughly 24% of the last twelve months’ revenues. Beltranena said cash was $766 million, “only $8 million below the prior quarter,” and net leverage was 3.2 times. Pous said the company has no material near-term debt maturities and has financed all predelivery payments for aircraft scheduled through mid-2028.

On fleet and engines, Pous said the fleet totaled 155 aircraft as of March 31, with an average age of 6.8 years and 66% classified as fuel-efficient new models. The airline averaged 36 aircraft grounded during the quarter due to engine-related issues, reducing AOGs by nine aircraft, peaking at 41 and ending the quarter at 32.

Beltranena and Pous both referenced fuel efficiency benefits from a higher proportion of neo aircraft. Beltranena said shifting 10 aircraft from ceo to neo generates roughly $2 million in monthly fuel savings at current fuel prices. In Q&A, Pous said the $2 million figure is based on current fuel prices, and added there is “no effect on rent” from the shift because the company is paying lease costs on the full fleet even with grounded aircraft.

Beltranena also outlined a longer-term fleet strategy, saying contractual fleet size is expected to decline from 155 aircraft in December 2025 to roughly 137 by year-end 2027, while the productive revenue-generating fleet is expected to rise to about 125 aircraft from 112 at the end of 2025. He said this transition is expected to generate about $50 million in annual lease savings and reduce lease liabilities by roughly $360 million by 2027. Pous separately referenced liabilities expected to decrease by around $340 million in 2027 as the contractual fleet declines.

Viva transaction update and regulatory timeline

Beltranena provided an update on the company’s proposed transaction with Viva, saying the regulatory process “continues to move forward as expected.” He said the company has filed with Mexico’s National Antitrust Commission, responded to and closed the first round of information requests, and recently received a second request of information.

Beltranena said an extraordinary shareholders meeting on March 25 showed strong support, with 94% quorum and 92% approval of total outstanding shares. He said the company continues to expect the overall regulatory review process to take up to 12 months from the transaction announcement date.

In response to analyst questions, Beltranena said there are no adjustment mechanisms in the transaction based on relative profitability. He also said the structure would allow both airlines to maintain independent operations while capturing scale benefits, though he emphasized approvals are still required.

About Controladora Vuela Compania de Aviacion NYSE: VLRS

Controladora Vuela Compañia de Aviacion, SAB de CV NYSE: VLRS is a Mexico-based airline holding company whose primary business is the operation of low-cost scheduled air transportation services. Through its principal operating subsidiary, Volaris, the company provides passenger and cargo flights on domestic and international routes. Its business model emphasizes unbundled ancillary services and point-to-point operations designed to offer competitive fares across its network.

Volaris serves more than 120 routes linking major metropolitan areas and secondary cities in Mexico, the United States and Central America.

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