Controladora Vuela Compania de Aviacion SAB de CV Q3 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Duane Pfennigwerth - Evercore Inc - Analyst : You mentioned a couple of interesting things in the prepared remarks. One, international is tracking stronger than normal seasonality, and then two, that you believe we're at an inflection point in US transborder. Can you just elaborate on both of those? Holger Blankenstein - Controladora Vuela Compania de Aviacion SAB de CV - Executive Vice President - Airline Commercial and Operations Good morning, Duane. This is Holger. Let me talk a little bit more in detail about the US-Mexico market. We're talking about an inflection point because since mid-August, our sales in the US-Mexico transborder market are above last year's level. That clearly demonstrates our ability to fine-tune our capacity, manage demand, and capture the market momentum that we're seeing. If we look into the fourth quarter, the US-Mexico transborder booking trends are also showing REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2025 / 3:00PM, VOLARA.MX - Q3 2025 Controladora Vuela Compania de Aviacion SAB de CV Earnings Call a sustained improvement compared to last year, and that's why we are quite optimistic about the fourth-quarter traffic evolution, both in the domestic but also in the transborder market.

Question: Shannon Doherty - Deutsche Bank AG - Analyst : This is Shannon Doherty on for Mike. Enrique, you alluded to some growth trends, you know, or the growth trends, I should say, that you saw out of Guadalajara emerging in other markets. Can you provide us with some more examples? Enrique Beltranena Mejicano - Controladora Vuela Compania de Aviacion SAB de CV - President, Chief Executive Officer, Co-Founder, Director Sure. _____ Sure. I think when you look at our bus fare customer base, that's a segment that grows by far much more rapidly and much more different than any other business traffic that we can see, for example, in the US. You can also see how our capacity to penetrate the markets has improved our number of passengers that are using the airlines. In the last years, we have developed more than 10 million passengers that have become first-time flyers, and that's really important. So that makes a dramatic difference versus a mature market.

Question: Rogerio Araujo - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Congratulations on the results. I have a couple here on fleet. First, you said 17 aircraft returning. Is that correct? How many you expect to be delivered by 2026? Also, on that matter, what is the number of expected grounded aircraft throughout 2026? I understand you have 36 now. Lastly, how to think the net CapEx for 2026 compared to these $250 million in 2025? Thank you. Jaime Esteban Pous Fernandez - Controladora Vuela Compania de Aviacion SAB de CV - Chief Financial Officer, Senior Vice President This is Jaime. Jose is back [again into our] fleet plan. Let me try to be really on a summary. Our goal next year is to reduce significantly the gap between productive and non-productive fleet. It has many moving pieces. I'm going to start with AOGs. We see an improvement in AOGs. Remember, this year we expect and year to date, we have 36 average grounded planes. We expect that that will improve to around 32, 33 next year, with the highest point of the AOGs initially in January and significantly going down by year end. The second moving piece is deliveries from Airbus. We're expecting around 12 to 13 deliveries of aircraft from Airbus. Still, we need to confirm that with Airbus and we will need detailed guidance in the next earnings call. And finally, with deliveries, we are budgeting 17 aircraft to be re-delivered. All of those moving pieces, we are planning you to think about ASM growth next year, as Enrique mentioned and reiterated, in the range of 6% to 8%, which factors all of the above that I am mentioning. Compensation with Pratt, multi-year agreement remains to 2028, but we are seeing an improvement, and we are planning with the flexibility to adapt our demand to customer demand and market condition with the characterization of flexibility in our plans.

Question: Rogerio Araujo - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Perfect. Thank you. Jaime Esteban Pous Fernandez - Controladora Vuela Compania de Aviacion SAB de CV - Chief Financial Officer, Senior Vice President I just want to say it again. I mean, our numbers of growth for next year are all-inclusive. They include the returns of the engines from Pratt, the deliveries from Airbus, the replacement of aircraft from the actual fleet. They include the re-deliveries. They include everything, all of the above. It's included in the number. Please think about that number as a total number of growth and not the conflict with capacity into the market.

Question: Filipe Nielsen - Citibank Cameroon SA - Analyst : Congrats on the results. My question is regarding CASM ex fuel. You guided (inaudible) [$0.0575]. You mentioned about the timing of having maintenance, putting this a little bit higher than expected. I just wanted to understand how this should evolve. Is it a one-off in fourth quarter related to maintenance or is it something that will continue throughout 2026? How are you looking at this trend and not only at the quarter? Just trying to understand the cost impact here. Thank you. Jaime Esteban Pous Fernandez - Controladora Vuela Compania de Aviacion SAB de CV - Chief Financial Officer, Senior Vice President Hi. This is Jaime. I'm going to start just for the 4Q. The sequential increase reflects the normal (inaudible) in specific cost lines that typically break higher in the 4Q as happened last year. It represents higher landing, takeoff, and navigation expenses due to the increased mix of international operations in the 4Q. We also have additional related re-deliveries and heavy maintenance events, which temporarily elevate unit costs. Both of them are non-structural impacts aligned with our planned maintenance schedule. As I mentioned, we will provide full guidance for 2026 in the next earnings calls. You are going to see a higher CASM mix than this year related to the investment in maintenance and re-delivery to have the fleet aligned with our growth plans. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2025 / 3:00PM, VOLARA.MX - Q3 2025 Controladora Vuela Compania de Aviacion SAB de CV Earnings Call

Question: Jens Spiess - Morgan Stanley - Analyst : On the point of groundings and being the peak at the beginning of next year and then gradually improving, by year end, how many aircraft do you expect to be grounded? And then when do you expect groundings to reach zero? Is it by mid-2027, by the end of 2027? What's your visibility on that? Jaime Esteban Pous Fernandez - Controladora Vuela Compania de Aviacion SAB de CV - Chief Financial Officer, Senior Vice President (technical difficulty)

Question: Jens Spiess - Morgan Stanley - Analyst : End of 2020. Okay, perfect. And if I may, just one additional one. Obviously, you already gave a lot of details on ASM growth for next year and all the variables but clearly, you have a lot of flexibility given the re-deliveries, the 17 re-deliveries you have next year. If demand is much better than expected, by how much could you potentially increase ASM growth? Conversely, if demand is weak, by how much could you reduce it potentially? Thank you. Holger Blankenstein - Controladora Vuela Compania de Aviacion SAB de CV - Executive Vice President - Airline Commercial and Operations By around 2% touch points either up or down.

Question: Guilherme Mendes - JPMorgan Chase & Co - Analyst : Just a quick follow-up. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2025 / 3:00PM, VOLARA.MX - Q3 2025 Controladora Vuela Compania de Aviacion SAB de CV Earnings Call Holger, you mentioned about an overall rational supply on the market, meaning rational competition. I just wanted to hear your thoughts on how should we think about competition in 2026. There's additional capacity coming online from you and from some of your peers. If you were to expect the current rationale and discipline competitive environment to remain in 2026. Thank you. Holger Blankenstein - Controladora Vuela Compania de Aviacion SAB de CV - Executive Vice President - Airline Commercial and Operations This is Holger. We have some visibility on the domestic market. For us, in the Mexican domestic markets, we are budgeting low- to mid-single-digit growth for 2026, and we will provide more granularity on our growth rate in the domestic market when we provide the full year guidance in our next earnings call. If we look at the competition, we have visibility on the published schedules of our domestic competitors. Industry growth is likely to remain rational from what we can see right now, and that obviously supports a higher and healthier fare environment for us. We are seeing now that competitors have been following a meaningful capacity rationalization to bring capacity in line with domestic demand. We see that trend continuing into 2026, which will lead to a more balanced and healthy domestic supply-demand environment.

Question: Alberto Valerio - UBS AG - Analyst : Just a follow-up about the groundings. If you expect to normalize it in the end of 2027, 2028, if I am right about this? About cycles, how have been the cycles of engines and also the deliveries of Airbus? When should we see some normalization on this? If I may, another one is about one line on the results that if the variable leases come a little bit below what we were expecting, what we were estimating, should we keep that for the future? This is more related to spare engines. Is that correct? If you can give some call on that. Thank you very much. Jaime Esteban Pous Fernandez - Controladora Vuela Compania de Aviacion SAB de CV - Chief Financial Officer, Senior Vice President This is Jaime. As I mentioned, we expect a positive trend on engines returning from the shops. We rescheduled with Airbus. This year, the deliveries are quite aligned on what we planned. Some minor delays or non-material delays. We expect that to continue next year. We have not yet any signal [that things are terrible already] because we rescheduled by year end. We are planning accordingly with that, with a lot of flexibility, with different levers that we have in our fleet plan between re-deliveries, deliveries of planes, and then it's coming back from the shop. We are casually optimistic and planning around that. [It is your right]. We should be out of the material impact by 2027 with some minor AOGs in terms of absolute numbers in 2028. Compensation covers until 2028 from Pratt. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2025 / 3:00PM, VOLARA.MX - Q3 2025 Controladora Vuela Compania de Aviacion SAB de CV Earnings Call