Source: Viva Aerobus
Grupo Viva Aerobus, S.A. de C.V. (“Viva Aerobus” or “Viva”), the parent company of Aeroenlaces Nacionales S.A. de C.V., announced today its 1Q 2024 financial results.
Juan Carlos Zuazua, Chief Executive Officer, commented:“I’m very proud of our team’s dedication to overcoming numerous challenges while putting our customers and Gente Viva first. Our commitment to protecting the business and maintaining disciplined management drives our daily decisions. Our solid 1Q is a testament to our prudent management and reflects the resilience and flexibility of our ULCC business model in a consolidated and underpenetrated Mexican aviation market.
We remain cautious given the challenges stemming from the P&W engine recalls, which continue to impact the global industry and our operations. Although negotiations are ongoing with P&W, we expect a resolution soon, and yet still no compensation is reflected in our 1Q 2024 financials, thus impacting our unit costs.
Despite the operational headwinds, we increased our revenues by 78.5% to US$619 million. Our profitability remained robust, especially since 1Q is the slowest seasonal quarter in Mexico. The higher revenues and lower fuel prices supported leading EBITDAR, EBIT, and Net income margins of 38.0%, 16.7%, and 9.0%, respectively. The strength of our network, disciplined capacity deployment, revenue management and ancillary strategies enabled us to counter unit cost pressures.
Our liquidity remains strong, with cash & cash equivalents increasing to US$1,039 million, equivalent to 45.3% of LTM revenues. Furthermore, our net leverage decreased from 1.8x last quarter to 1.5x, further strengthening our capital structure.
Looking ahead, we maintain an unwavering focus on our disciplined capacity deployment and operational reliability to protect the business in a challenging operational environment. This strategic direction inspires confidence in our ability to navigate market dynamics and pursue a sustainable profitable growth.”
Total Operating Revenues increased 78.5% to US$619 million for the quarter, reflecting higher unit revenues, healthy load factors, and disciplined capacity growth. This performance was mainly driven by fare and ancillary revenue growth, with TRASM increasing 50.8% to US₵11.64, coupled with ASMs growing 18.4%, primarily due to lower base comparison in 1Q 2023 and short-term leases (ACMIs).
During the quarter, Viva’s total passengers increased 18.7% to 6.2 million, reflecting higher demand in the domestic and international markets. Ancillary revenues increased 57.3% to US$259 million compared to 1Q 2023, representing 41.9% of total revenues.
Total Operating Expenses increased 40.1% to US$516 million, below revenue growth. This increase was mainly driven by a higher capacity of 18.4% in ASMs, higher costs related to AOGs, including short-term leases (ACMIs) to maintain capacity, a negative FX impact due to the appreciation of the Mexican peso versus the U.S. Dollar, coupled with inflationary pressures. The total operating expenses do not reflect yet any compensation from Pratt & Whitney GTF engines reliability issues.
CASM increased 18.3% to US₵9.69 for the quarter, reflecting a decrease of 11.7% in CASM fuel to US₵3.12 and an increase of 41.0% in CASM ex-fuel to US₵6.57. The CASM ex-fuel increase was mainly driven by the negative impacts in utilization from AOGs related to the Pratt & Whitney GTF engines reliability issues, short-term leases (ACMIs) costs, the appreciation of the Mexican peso versus the U.S. Dollar, and inflationary pressures. These effects were partially offset by continuous cost optimization initiatives.
Operating Profit reached US$104 million, reflecting higher unit revenues and lower fuel prices. The EBIT margin increased 22.9 percentage points, from -6.1% to 16.7%.
Net Income reached US$56 million, with a net margin of 9.0%.
During 1Q 2024, we added 2 net aircraft (2 Airbus 321neo), and 13 net aircraft (1 Airbus 320ceo, 2 Airbus 320neo, 1 Airbus 321ceo, and 9 Airbus 321neo) compared to March 2023.
Our fleet ended 1Q 2024 with an average age of 5.5 years. Viva’s fleet was recognized, once again, as the youngest in Mexico and the fifth youngest in North America by ch-aviation’s Youngest Aircraft Fleet Award 2024.
During 1Q 2024, we had an average of 16.1 A320neo aircraft on ground related to the Pratt & Whitney GTF engines reliability issues. To mitigate the impacts of the P&W engine recall on our network, we are extending leases, taking contracted new deliveries, and sourcing short- and medium-term capacity.
Hedging
As of March 31, 2024, Viva has FX hedging to mitigate volatility and price shifts. We hedged 56.6% of our projected FX exposure for 2024.
Change in Reporting Currency to U.S. Dollar
In 2020, Viva Aerobus determined that its functional currency was the U.S. Dollar. Effective October 1st, 2022, Viva decided to change its reporting currency from Mexican Pesos (“MX$”) to U.S. Dollar (“US$”) based on International Accounting Standard 21, “The Effects of Changes in Foreign Exchange Rates”(“IAS 21”) under International Financial Reporting Standards (“IFRS”), having the authorization of Grupo Viva Aerobus, S.A. de C.V. Board of Directors, considering the previous favorable opinion of the Audit Committee. KPMG’s auditors letter acknowledges Viva’s change in reporting currency to comply withthe Comisión Nacional Bancaria y de Valores (“CNBV”) requirements.
Viva believes that the use of the U.S. Dollar for the reporting
Glossary
ASMs: Stands for “available seat miles” and represents the number of seats available for passengers multiplied by the number of miles.
Average operating aircraft utilization is calculated by block hours per aircraft per day, meaning the total number of block hours divided by the average operating fleet and divided by the number of days in the period.
Average total aircraft utilization is calculated by block hours per aircraft per day, meaning the total number of block hours divided by the average total fleet and divided by the number of days in the period.
CASM: Stands for “cost per available seat mile” and represents total operating expenses divided by available seat miles (ASMs).
CASM ex-fuel: Represents total operating expenses excluding fuel expense divided by available seat miles (ASMs).
EBITDA: Stands for “Earnings before interest, taxes, depreciation and amortization” and it is calculated as consolidated Net Income (loss) for the year adding back income taxes, financial income and financial costs and depreciation and amortization. Financial income includes interest income on cash and cash equivalents, interest paid by related parties and exchange gains. Financial costs include interest expense on financial liabilities, interest on lease liabilities, valuation of financial instruments and exchange loss. EBITDA is a non-International Financial Reporting Standards (“IFRS”) financial measure. A non-IFRS financial measure is generally defined as one that purports to measure financial performance but excludes amounts that would not be so adjusted in the most comparable IFRS measure.
EBITDAR: Stands for “Earnings before interest, taxes, depreciation, amortization and rent expense” and it is calculated as consolidated net income (loss) for the year adding back income taxes, financial income and financial costs, depreciation and amortization, and leases. EBITDAR is a non-IFRS financial measure, as defined above.
Load Factor: Represents the number of miles flown by passenger (RPMs) divided by available seat miles (ASMs) and expressed as a percentage.
TRASM: Stands for “total operating revenue per available seat mile” and represents our total operating revenue divided by our total available seat miles.
RPMs: Stands for “revenue passenger miles” and represents the number of miles flown by passengers. Passengers: Customers who purchased their plane ticket to fly during the month referred in the report,
regardless of whether they flew or not.
Yield: Defined as total operating revenues divided by revenue passenger miles (RPMs).
Starting on January 1, 2020, the Company determined the US Dollar (USD) as its functional currency. Starting October 1, 2022, the Company determined the US Dollar (USD) as its reporting currency.