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 3Q 2024 financial results.
Juan Carlos Zuazua, Chief Executive Officer, commented: “I am extremely proud of our Gente Viva, who have been navigating the P&W engine recall crisis and extreme weather events with the utmost commitment to protecting our passengers, employees, and our business. Despite facing one of the most challenging operational environments in recent memory, our resilient and flexible ULCC business model and disciplined capacity management have allowed us to continue our profitability path on a net income basis.
While our unit costs continue to feel pressure from the P&W engine inspections due to lower aircraft utilization, lost operational efficiencies, and capacity mitigation strategies, we have been able to achieve three critical goals: protecting our customers, fostering the #1 employee culture1, and delivering profitability.
During the third quarter, our markets saw positive momentum, driven by our strong network and effective revenue management, as demonstrated by a 9.6% increase in unit revenues (TRASM) to US₵11.05. On the back of higher unit revenues, lower fuel costs, and cost recoveries related to AOG compensation, we enhanced net income by US$15 million compared to the same period last year to US$70 million for the quarter, a 10.6% net margin.
Through the first nine months of 2024, we have maintained strong liquidity levels of US$848 million and a healthy net leverage of 1.5x, further strengthening our capital structure. As we continue to navigate operational challenges, we remain cautious and focused on executing our disciplined capacity management while consistently delivering results.”
Total Operating Revenues increased 16.4% to US$665 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 9.6% to US₵11.05, coupled with ASMs growth of 6.1%, primarily due to aircraft deliveries and short-term leases (ACMIs). During the quarter, Viva’s total passengers increased 6.5% to 7.3 million, reflecting higher demand in the domestic and international markets. Ancillary revenues increased 14.0% to US$289 million compared to 3Q 2023, representing 43.5% of total revenues.
Total Operating Expenses increased 9.8% to US$504 million, below revenue growth. This increase was mainly driven by a higher capacity of 6.1% in ASMs, higher costs related to AOGs, including short-term leases (ACMIs) to maintain capacity, coupled with inflationary pressures. The total operating expenses were partially offset by AOG compensation from Pratt & Whitney and lower fuel costs.
CASM increased 3.5% to US₵8.37 for the quarter, reflecting an increase of 12.2% in CASM ex-fuel to US₵5.58, partially offset by a decrease of 10.4% in CASM fuel to US₵2.79. 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, and inflationary pressures. These effects were partially offset by continuous cost optimization initiatives and AOG compensation from Pratt & Whitney.
Operating Profit reached US$161 million, reflecting higher unit revenues. The EBIT margin increased by 4.5 percentage points, from 19.7% to 24.2%.
Net Income reached US$70 million, with a net margin of 10.6%. During 3Q 2024, we added 2 net aircraft (1 Airbus 320ceo and 1 Airbus 321neo), and 8 net aircraft (2 Airbus 320ceo, 1 Airbus 321ceo, and 5 Airbus 321neo) compared to September 2023.
Our fleet ended 3Q 2024 with an average age of 6.2 years. Viva’s fleet was recognized, once again, as the youngest in Mexico and the fifth youngest in North America by ch-aviation’s Youngest Aircraft Fleet Award 2024.
During 3Q 2024, we had an average of 24.1 A320neo aircraft on ground related to the Pratt & Whitney GTF engines reliability issues. To mitigate the impacts of the P&W engine recall on our network, we are extending leases, taking contracted new deliveries, and sourcing short- and medium-term capacity.
Hedging
As of September 30, 2024, Viva has jet fuel and FX hedging to mitigate volatility and price shifts. We hedged 50.0% of our expected jet fuel for the rest of 2024 and, as for FX, our hedging is equivalent to 56.7% of our projected exposure for the rest of 2024.
In 2020, Viva Aerobus determined that its functional currency was the U.S. Dollar. Effective October 1st, 2022, Viva decided to change its reporting currency from Mexican Pesos (“MX$”) 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 with the Comisión Nacional Bancaria y de Valores (“CNBV”) requirements.
Viva believes that the use of the U.S. Dollar for the reporting of its consolidated financial information will improve and facilitate the analysis of its consolidated financial statements for a wide range of users (rating agencies, analysts, investors, and creditors, among others).
Forward-looking Statements
This earnings release includes forward-looking statements. Viva Aerobus has based these forward-looking statements largely on its current expectations and projections about future events and financial trends affecting the financial condition of Viva Aerobus’ business. Forward-looking statements should not be read as a guarantee or assurance of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to, the competitive environment in Viva Aerobus’ industry, including those arising from non-air travel substitutes; ability to respond to global health crises, such as the COVID-19 pandemic, as well as the potential outbreak of other diseases and pandemics; ability to keep cost low, consistent with our ultra-low-cost carrier (“ULCC”) model; changes in Viva Aerobus’ fuel cost, the effectiveness of Viva Aerobus’ fuel cost, hedges and Viva Aerobus’ ability to hedge fuel costs through options, swaps and other financial instruments; the impact of Mexican and worldwide economic conditions on customer travel behavior; actual or threatened terrorist attacks, global instability and potential U.S. military actions or activities; ability to generate non-ticket revenues; external conditions, including weather conditions and natural disasters; air traffic congestion, outbreak of disease and a further outbreak or escalation of COVID-19 or any related/mutated form of COVID-19; ability to maintain slots in the airports that we operate and service provided by airport operators; ability to operate at new airports on terms that are consistent with our business strategy and ULCC model; the ability of Viva Aerobus and Allegiant to obtain regulatory approval from all requisite regulators in order to realize the potential benefits of the alliance, labor disputes, employee strikes and other labor-related disruptions, including in connection with our negotiations with our union; loss of any of our key personnel and ability to attract and retain qualified personnel; aircraft-related fixed obligations; dependence on cash balances and operating cash flows; aircraft maintenance costs; reliance on automated systems and the risks associated with changes made to those systems; use of personal data and the effect of potential data privacy breaches and cyber-attacks; government regulation, changes in laws and interpretation and supervision of compliance thereof and ability to comply with applicable law; maintaining and renewing permits and concessions; Viva Aerobus’ ability to execute Viva Aerobus’ growth strategy; operational disruptions; Viva Aerobus’ indebtedness; Viva Aerobus’ liquidity; Viva Aerobus’ reliance on third-party vendors and partners; reliance on a single jet fuel provider in Mexico; an aircraft accident or incident; aircraft and engine suppliers; changes in the Mexican market;insurance costs; and costs to comply with environmental regulations; and currency fluctuations, especially the devaluation and depreciation of the Mexican peso.
In addition, in this press release, the words “believe”, “may”, “estimate”, “continue”, “anticipate”, “intend”, “expect”, ”will”, “predict”, “potential” and similar expressions, as they relate to Viva Aerobus, its business and its management, are intended to identify forward- looking statements. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this press release may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.
All forward-looking statements attributable to Viva Aerobus or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date of this press release. You should not put undue reliance on any forward-looking statements. Viva Aerobus assumes no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable law. If Viva Aerobus updates one or more forward-looking statements, no inference should be drawn that Viva Aerobus will make additional updates with respect to those or other forward-looking statements.
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 scheduled passengers (RPMs) divided by scheduled 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).