Source: Viva Aerobus
Juan Carlos Zuazua, Chief Executive Officer, commented: “The unique challenges presented in 1Q 2024 continued into engine recall crisis. We have navigated these challenges through our resilient and flexible ULCC business model and disciplined capacity management, which have been crucial in mitigating further passenger disruptions and maintaining profitability. Additionally, we have fostered the #1 employee culture in all of Mexico, as recognized by Top Companies 2024 award1.
The P&W engine inspections continue to pressure the global industry and our operations, impacting our utilization levels, operational efficiency, and unit costs. While our capacity mitigation strategies have minimized disruptions, our unit costs have temporarily increased. On the positive side, we successfully closed negotiations with P&W in the second half of 2Q 2024, and our financials now reflect a portion of the compensation.
Our quarterly revenues increased 34.3% to US$612 million, primarily driven by a robust demand environment and higher capacity. This double-digit revenue growth supported solid profitability levels, with EBITDAR, EBIT, and net income margins of 38.2%, 13.4%, and 5.5%, respectively.
We maintain strong liquidity levels of US$967 million, equivalent to 39.4% of LTM revenues, and a healthy net leverage of 1.5x, allowing us to sustain a robust capital structure and financial position.
With the peak summer season upon us, we are focused on executing our disciplined capacity management as we navigate the P&W engine recall crisis and extreme weather events. We are proud of our team’s unwavering commitment to protecting the business, our Gente Viva, and passengers while delivering results in a challenging environment.”
Total Operating Revenues increased 34.3% to US$612 million for the quarter, reflecting higher unit revenues and disciplined capacity growth. This performance was mainly driven by fare and ancillary revenue growth, with TRASM increasing 19.3% to US₵10.53, coupled with ASMs growth of 12.6%, primarily due to aircraft deliveries and short-term leases (ACMIs).
During the quarter, Viva’s total passengers increased 10.0% to 6.8 million, reflecting higher demand in the domestic and international markets. Ancillary revenues increased 26.8% to US$283 million compared to 2Q 2023, representing 46.3% of total revenues.
Operating Expenses
Total Operating Expenses increased 36.0% to US$530 million. This increase was mainly driven by a higher capacity of 12.6% 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, higher fuel prices, coupled with inflationary pressures. The total operating expenses now reflect a portion of the compensation from Pratt & Whitney GTF engines reliability issues.
CASM increased 20.8% to US₵9.11 for the quarter, reflecting an increase of 6.2% in CASM fuel to US₵2.99 and an increase of 29.4% in CASM ex-fuel to US₵6.12. 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 and a portion of the compensation from Pratt & Whitney GTF engines reliability issues.
Operating Profit reached US$82 million, reflecting higher unit revenues. The EBIT margin decreased 1.1 percentage points, from 14.5% to 13.4%.
Net Income reached US$34 million, with a net margin of 5.5%.
Fleet
During 2Q 2024, we added 1 net aircraft (1 Airbus 320ceo), and 11 net aircraft (2 Airbus 320ceo, 1 Airbus 320neo, 1 Airbus 321ceo, and 7 Airbus 321neo) compared to June 2023.
Our fleet ended 2Q 2024 with an average age of 5.9 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 2Q 2024, we had an average of 23.4 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 June 30, 2024, Viva has jet fuel and FX hedging to mitigate volatility and price shifts. We hedged 10.7% of our expected jet fuel for 2024 and, as for FX, our hedging is equivalent to 65.9% of our projected exposure for 2024.