Aeroméxico Q1 2026 Earnings Call Summary

Key Financial Results
- Q1 Revenue: $1.34 billion, up 13.3% YoY (above guidance)
- Operating Margin: 11% (within guidance range)
- Adjusted EBITDAR: $336 million with 25% margin
- Liquidity: Exceeded $1.2 billion ($1 billion cash + $200 million undrawn credit facility)
- Leverage: Improved to 1.7x adjusted net debt-to-EBITDAR

Operational Highlights
- Recognized by Cirium as most on-time airline globally in Q1 2026 (third consecutive year of #1 ranking)
- Unit revenue (TRASM) grew 15% YoY
- Generated over $200 million in operating cash flow
- Reduced financial debt by ~$10 million
- Fleet efficiency: fuel consumption per ASM down 1.4% YoY, saving ~$5 million

Revenue Performance
- International: +13.6% YoY, led by long-haul markets (Europe, Asia, South America) – represents 70% of total revenue
- Domestic: +12.7% YoY, supported by improved border and beach markets
- Loyalty: Aeroméxico Rewards participation reached record 38% (up 10 points YoY); redemption revenue +22% YoY
- Premium mix: 42% (up 1 point YoY, up 18 points vs. 2019)
- Direct online sales: Record 48% (up 3 points YoY, up 23 points vs. 2019)

Major Challenges
- Fuel crisis: Jet fuel prices surged significantly due to Middle East conflict
- Q1 impact: Estimated $36 million adverse effect from higher fuel prices and demand disruptions in specific Mexican regions
- Fuel structure: Fuel represented ~21% of 2025 revenues (lower than regional competitors)
- Limited pricing flexibility in Q1: 80% of tickets already sold when conflict started (due to early Easter timing)

Q2 2026 Guidance & Outlook
- Capacity: +1.5% to 2.5% YoY (reduced 0.5 points from original plan)
- Revenue growth: +12.5% to 15.5% YoY (low to mid-double-digit)
- EBITDAR margin: 17%-20%
- Operating margin: 4%-7%
- Fuel recapture: Expect to recover ~50% of incremental fuel costs in Q2
- Fuel assumption: ~$4 per gallon ($3.80-$4.20 range)

Fuel Recapture Strategy
Progressive improvement expected:
- Q2 2026: ~50% fuel cost recovery
- Q3 2026: ~70% recovery
- Q4 2026: ~100% recovery

Success driven by:
- Strong international pricing power (especially long-haul wide-body network ~40% of capacity)
- Network optimization and capacity cuts in cash-negative markets
- 35-day average ticket liability allows gradual repricing

Cost Management Initiatives
- Hiring freeze (except critical operational roles)
- Reduced discretionary spending
- Prioritizing MAX fleet deployment for fuel efficiency
- Strategic capacity adjustments (e.g., cutting Atlanta-San Luis Potosi route)
- Optimizing engine maintenance programs
- Working capital reduction

Fleet & Network Strategy
- Full year capacity growth revised to 2%-3% (from original 3%-5%)
- Growth focused on profitable wide-body routes (especially new Barcelona service)
- Expecting 2 additional 787s and 3 737 MAXs in 2026
- Ending year with ~170 aircraft (from 165)
- No material fleet commitments remaining in 2026
- Maintaining Mexico City slot portfolio as top priority

Fuel Availability
- No domestic concerns (Pemex refines jet fuel locally)
- Working with Delta to secure international fuel supply
- Europe/Asia airports confirmed fuel availability for next 8+ weeks
- Monitoring situation closely if conflict continues

Management expressed confidence in navigating the volatile environment through structural advantages, strong market position, industry-leading operations, and disciplined execution.