Volaris Q4 2025 Earnings Call Summary

Strategic Overview:
Volaris delivered disciplined execution in Q4 2025 despite a challenging environment including engine constraints, FX volatility, and cross-border travel sentiment impacts. The company achieved its full-year EBITDAR margin guidance of 32.5%, demonstrating improving business trajectory while advancing a merger agreement with Viva to create an airline group expanding ultra-low-cost travel penetration in Mexico.

Q4 2025 Performance:
Total operating revenues reached $882 million (up 5.6% YoY) with TRASM of $0.0935, converging to strong Q4 2024 levels. Capacity grew 5.6% (below 8% guidance due to severe weather disruptions, particularly fog in Tijuana, creating ~$7 million P&L impact). International load factor improved to 79% (up from 77.5% in first nine months), while domestic reached 89.8%. Ancillary revenues comprised 56% of total operating revenues with 6% per-passenger growth. EBITDAR reached $328 million (37.2% margin); EBIT $100 million (11.3% margin); net profit $4 million ($0.04 per ADS).

Full Year 2025:
Revenues totaled $3 billion (down 3% YoY). CASM ex-fuel held at $0.0558 (3.5% increase) despite capacity adjustments from originally planned mid-teens growth to 6.3%. EBITDAR was $988 million (32.5% margin, down 13%); EBIT $135 million (4.4% margin); net loss $104 million ($0.91 per ADS). Cash flow from operations: $252 million in Q4. Liquidity ended at $774 million (25.5% of trailing revenues, above 20% target). Net debt-to-EBITDAR: 3.1x (unchanged from Q3).

Fleet & Engine Situation:
Fleet consists of 155 aircraft (66% new fuel-efficient models, average age 6.6 years). Q4 averaged 36 aircraft on ground (AOG) due to Pratt & Whitney engine issues; peaked at 41 in January. Management projects inflection point with AOGs declining to ~25 by year-end (full-year average ~33, representing 3 additional productive aircraft vs. 2025). Company proactively advancing maintenance events and doubling engine inductions with improved turnaround times—this drives higher near-term costs but accelerates fleet availability recovery. Returning 14 aircraft in 2026. Spread between EBITDAR and EBIT margins reached 28% in 2025 (vs. historical 18-19%); expected to tighten to 24% in 2026 and normalize by 2028.

Commercial Developments:
Launched Premium+ blocked middle-seat product (October 2025) exceeding uptake expectations. Altitude loyalty program reached ~800,000 enrollments in seven months; co-branded credit card integration planned by Q2 2026. Announced 33 new summer routes from strategic cities including Guadalajara (adding Detroit, Salt Lake City), Puebla, Queretaro, and San Luis Potosi. Activated codeshares with Copa and Hainan (joining Frontier, Iberia), driving 30%+ codeshare revenue growth in 2025. Domestic market showing ~60% traffic from leisure/business/multi-reason travelers. Cross-border market sentiment improving sequentially since Q3 2025.

2026 Guidance:
- ASM growth: ~7% (2/3 allocated to international markets; domestic low-to-mid single digits)
- EBITDAR margin: ~33%
- CapEx (net of predelivery payments): ~$350 million (elevated due to accelerated engine inductions and 14 aircraft redeliveries)
- Q1 2026: 3% ASM growth, $0.085 TRASM, $0.06 CASM ex-fuel, ~25% EBITDAR margin (Q1 EBIT margin flat YoY vs. -1.5% in Q1 2025)
- FX assumption: MXN 17.7/$; Q1 MXN 17.5/$
- Fuel price: $2.1-2.2/gallon; Q1 $2.2/gallon
- Net debt-to-EBITDAR target: 2.6x by year-end (from 3.1x)

Viva Merger Update:
Regulatory process progressing as expected. Filed with Mexico’s National Antitrust Commission; responded to first information round. Extraordinary shareholders’ meeting scheduled March 25; prospectus publication March 5. Overall regulatory review expected to take up to 12 months from announcement date. Transaction aims to create airline group expanding ultra-low-cost access while preserving unique brands.

Medium-Term Outlook:
Fleet count expected to remain roughly stable through 2030 with growth driven by increasing productive aircraft share (closing gap between total and productive fleet). This approach eliminates need for incremental fleet-related debt through decade-end while delivering guided ASM growth, improving EBITDAR-to-EBIT conversion, strengthening free cash flow, and enhancing ROIC. Company maintains flexibility through aircraft delivery schedules, engine returns, and lease management.