Prepared remarks
Good morning, and welcome to Aeromexico's Second Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a question and answer session at the end with instructions given at that time. For the webcast participants, you may submit questions at any time during the call using the Ask a Question section on the webcast. As a reminder, today's conference call is being recorded. Now I would like to turn the call over to Ms. Lucero Medina, Head of Investor Relations.
Good morning, everyone. Joining me today to discuss our results are Andrés Conesa, Chief Executive Officer, and Ricardo Sánchez Baker, our Chief Financial Officer. Before we get started, I would like to take this opportunity to remind you that during the course of this call, we will present results that are based on our unaudited consolidated financials. Accordingly, the financial results discussed today are based on information available to us as of the date of this call and are not a comprehensive final statement of our financial results for any period presented. We may make forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act regarding future events and our company's future performance. We caution you that several important factors could cause actual results to differ materially from plans and expectations expressed in this call, including the risk factors disclosed in our SEC filings. During the call, we will present certain non-IFRS financial measures. We have included a reconciliation and explanation of adjustments and other considerations of our non-IFRS measures to the most comparable measures in the earnings release. Both our call and the earnings release are available on our website. Now it is my great pleasure to turn the call over to Andrés Conesa.
Thank you, Lucero, and good morning, everyone. We appreciate you joining us today to discuss our second quarter 2026 results. The second quarter was characterized by high and volatile jet fuel prices and uncertainty regarding the impact of the World Cup on traffic, particularly in the corporate domestic market. I want to congratulate all the Aeromexico team for their efforts and commitment that resulted in achieving financial results for the second quarter generally in line with the guidance we provided last April. Revenue performance was strong with TRASM growing 10.5% year over year during the quarter, a period that also saw the two best sales weeks in our company's history. We kept discipline in non-fuel costs, mitigating the impact that a stronger exchange rate had on peso-denominated spending. Against this backdrop, the second quarter unfolded largely as we anticipated. Demand remained healthy in April and May, supported by solid market fundamentals and strong commercial execution across our network. In June, demand moderated in the domestic market, as travel patterns were temporarily affected by World Cup-related shifts. Despite this temporary change in momentum, our disciplined commercial and operational execution enabled us to deliver record revenues in both June and the second quarter while maintaining profitability within the guidance we shared three months ago. Our ability to respond quickly to changing market conditions continues to be one of our key competitive advantages. We adjusted our network in anticipation of lower corporate traffic in June around the dates where Mexico's national team played. A strategy that proved successful and allowed us to avoid some unprofitable flying. Capacity increased 2% year over year during the second quarter, in line with our guidance. Most adjustments were concentrated in the domestic market, where we continue to support growth across our international network. During the quarter, we launched two new long-haul routes, Mexico City to Barcelona and Monterrey to Paris, which are off to a strong start. We also operated dozens of charter flights connecting Mexico and the United States to transport several national soccer teams during the World Cup. Our premium customer base remains a key differentiator of our commercial strategy. During the second quarter, premium revenue mix reached 43%, up one percentage point year over year and 17 percentage points compared to 2019, marking the highest level in Aeromexico's history. This performance reflects the continuous strength of our premium value proposition, supported by continuing investments to enhance our customer experience and build deeper relationships with our clients. It is important to highlight that this performance was achieved in a high-yield environment. Despite fare increases driven by higher fuel costs, our customers did not trade down within the premium structure, underscoring the resilience of demand for our premium offering. As of the end of June, we led all global airlines in on-time performance according to Cirium, positioning us well to achieve the recognition of world's best on-time airline for the third consecutive year, a feat no other airline has attained. We are also very proud of the opening of our new best-in-class lounges and check-in facilities in Mexico City. We want to recognize AICM authorities for the investments they have made to significantly improve our commercial facilities. Also in this quarter, we proudly launched our new Aeromexico-Inbursa co-branded credit card program, providing customers with enhanced benefits and further strengthening our loyalty ecosystem. Aeromexico Rewards also continues to gain traction as an increasingly important driver of customer engagement and revenue quality. During the second quarter, a record 39% of our passengers participated in the program, up seven percentage points year over year. These initiatives, together with the quality and reliability of our operation, continue to drive higher customer satisfaction. Our NPS reached record heights during the second quarter, reinforcing the strong preference customers continue to show for our brand. Ricardo will provide a more detailed review of our financial results shortly. But before that, I would like to highlight a few key points that underscore the strength and resilience of our performance this quarter. EBIT margins stood at 5% despite fuel costs being approximately $30 million higher than the already high forecast we shared at the beginning of the second quarter. Adjusted for this additional impact, EBIT margins would have been at the top of the guidance range. We ended the second quarter with the same liquidity position we started the quarter, highlighting our ability to navigate through turbulent periods without burning cash or contracting debt. This achievement shows the resilience and the strength of our business model. Looking ahead, we are establishing new guidance for the remainder of the year. We expect higher EBITDAR and EBIT for both the third and the fourth quarters compared to the same periods in 2025. For the full year 2026, EBIT margin is projected to be in the low double-digit range, a remarkable outcome considering the challenging environment we have faced this year. Capacity is expected to recover and reach high single-digit year-over-year growth in the fourth quarter, supported by additional wide-body flying given the recent delivery of two 787 aircraft along with one additional aircraft expected later this year, as well as increased narrow-body flying supported by the additional slots that will become available in Mexico City during the next IATA season. This expanded wide-body fleet will allow us to further strengthen our European network and increase service to Seoul from five to seven weekly frequencies, reflecting sustained demand and reinforcing our local growth strategy. The first half of the year has once again demonstrated our ability to adapt quickly without compromising our long-term strategy. Healthy demand trends, disciplined commercial execution, and a more favorable fuel environment give us confidence that the second half of 2026 will deliver solid financial performance. We remain committed to managing capacity with discipline, investing in customer experience, and generating premium revenues. These principles have consistently differentiated Aeromexico and continue to position us to create sustainable value for our customers, our employees, and our shareholders. With that, I will turn it over to Ricardo to discuss our financial performance in more detail.
Thank you, Andrés, and good morning, everyone. I would like to echo Andrés' comments and congratulate the entire team on their outstanding performance in a very challenging environment. Delivering operational profitability despite fixed fuel price pressure is a remarkable achievement and a testament to the team's disciplined execution across service, operational, and financial KPIs. Let me now turn to our financial performance and highlight the key factors that shaped our second quarter results, as well as how we are positioning the business to deliver a stronger second half of the year. Total ASMs increased 1.9% year over year, in line with our guidance, as we proactively adjusted capacity throughout the second quarter to align with market conditions and protect profitability. Total revenue reached approximately $1.5 billion in the second quarter, representing 30% year over year growth, in line with our guidance. This performance was driven by strong demand across our network, continued growth in our premium segment, and solid pricing throughout the quarter. Although we experienced a temporary moderation in domestic demand during June due to World Cup-related travel patterns, we still delivered record second quarter revenue. Total revenue per available seat mile, or TRASM, increased 10.5% year over year, primarily driven by strong international passenger revenue and the appreciation of the Mexican peso. Passenger revenue per available seat mile, or PRASM, also improved 10% year over year. Total operating costs increased by 30%, primarily driven by elevated and volatile fuel prices. During the second quarter, we faced a fuel price headwind of approximately $220 million compared with 2025. This translated into roughly $30 million of incremental cost pressure relative to the assumptions underlying the guidance we provided in April. As we discussed on our April earnings call, our estimation was to recover at least 50% of this incremental fuel cost through pricing and revenue management initiatives. We exceeded that target, achieving a fuel cost recapture rate of 70%. Excluding fuel, operating expenses increased 13%, reflecting the continued strength of the Mexican peso, inflationary pressure on wages and salaries, and higher depreciation associated with fleet growth in 2025. Adjusted EBITDA totaled $260 million in the second quarter, representing a margin of 18%. Operating income reached $68 million, resulting in an operating margin of 5%. Both metrics were within the guidance range we provided in April. As mentioned earlier, average fuel prices during the quarter were approximately 8% above the assumptions underlying our guidance. As fuel prices evolve in line with those assumptions, we estimate that our operating margin would have finished at the upper end of our guided range. Turning to the balance sheet, we ended the second quarter with a strong liquidity position, including more than $1 billion in cash and total liquidity above $1.2 billion, including our fully undrawn $100 million revolving credit facility. This robust liquidity position reflects our ability to navigate a challenging environment while maintaining strong cash flow generation and avoiding incremental debt. We generated approximately $362 million in operating cash flow, reduced financial debt by approximately $17 million, and closed the second quarter with adjusted net debt below the balance recorded in the same period of last year. These results reflect our disciplined approach to capital allocation while preserving the financial flexibility to continue investing in the business and further strengthening our balance sheet. Heading into the peak summer travel season, we are entering from a position of strength. Demand trends remain healthy, supported by solid booking activity across both our domestic and international networks. In addition, the fuel price curve, although volatile, has moderated from the elevated levels experienced during April and May, providing a more favorable cost backdrop. Looking ahead to the third quarter, we expect to deliver another quarter of solid financial performance, with absolute results broadly in line with the strong levels achieved a year ago. Operating margins are expected to be modestly below last year's exceptionally strong levels, as higher fuel costs are largely being offset by higher revenues, resulting in a higher revenue base and, as a result, modestly lower margins. For the third quarter, we expect revenue between $1.59 billion and $1.62 billion, an adjusted EBITDA margin in the mid to high 20s, and an operating margin in the mid-teens. Looking further ahead to the fourth quarter, we expect to deliver our planned capacity growth and higher aircraft utilization, driving greater operating leverage and improved unit costs. Capacity is expected to increase approximately 6.5% to 8% year over year, supported by expanded operations at Mexico City International Airport, following the authority's approval to increase hourly operations from 44 to 46 beginning with the next IATA season. For the fourth quarter of 2026, we expect total revenue growth of 14.5% to 16.5%, an adjusted EBITDA margin of 28% to 31%, and an operating margin of 15.5% to 18.5%. Detailed assumptions regarding fuel prices and foreign exchange are included in the guidance section of our earnings release and in our webcast presentation. For the full year, we expect ASM growth of 2% to 3%, total revenue growth of 13% to 14% versus 2025, an adjusted EBITDA margin of 20.5% to 26.5%, and an operating margin of 11% to 13%. Our guidance reflects current market conditions and the assumptions we believe are most reasonable today. While uncertainty remains, we are confident in our ability to execute, adapt to changing market conditions, and continue creating long-term value for our shareholders. With that, we will now open the call for questions.
Questions and answers
Thank you very much. Thank you. Question, please press *1. If your question has been answered and you would like to remove yourself from the queue, please press *1 again. Our first question comes from Duane Pfennigwerth with Evercore ISI. Your line is open.
Hi. Good morning. I wonder if you could expand on the World Cup impact that you saw over the balance of the quarter. So maybe what corporate revenue growth looked like in April and May versus the level you saw in June, and then can you speak to what level you are seeing here in July and into the third quarter? Any metrics you can put around June that would really isolate it to the World Cup impact?
Hi, Duane. Good morning. The impact of the World Cup on domestic revenue we estimated for June to be around $24 million. That is the revenue lost for the month. Despite this, as we mentioned in our initial remarks, we had record revenues in June. We had our best June and our best second quarter in terms of revenues in our history. This number does not include the positive effects on charters, for example, as I mentioned, when we transported several teams during the World Cup. So overall, I would say that the impact of the World Cup on our revenues in June was slightly negative. We have seen a very fast change in patterns after last week, so we see a very strong recovery of corporate traffic and leisure traffic in the domestic market already for July and very solid numbers for August and September. We believe it was strictly a temporary effect and we are back to where we were in April and May. We can follow up after this call and give you the details for the daily corporate traffic growth for April and May versus June, but this is the story in general terms.
Okay, that is helpful. And then just again, talking about the third quarter or maybe the second half, where are you seeing the bigger relative improvement? Are you seeing a bigger turn in the domestic market or are you seeing a bigger turn or improvement in international? Thanks for taking the questions.
You know, international pricing reacted very fast once the conflict in the Middle East started, so we were able to start to reflect higher jet fuel prices on yields, as every other airline across the world, right away in March and April. Domestic was slower; April and May did not fully reflect the impact of higher jet fuel. In June, we saw better levels of pricing. Going forward, we see international demand very, very strong with no change, and that was not affected during the World Cup. Basically, domestic traffic is expected to recover both once the World Cup is behind us and also because yields during the start of the second quarter were not consistent with the level of jet fuel prices. That is the story going forward. As we stressed in our initial remarks, we are projecting very strong revenue numbers for the third and fourth quarters. The reason behind it is that when the conflict started we had most of our Q2 seats sold and we had availability for the second half, so we have been able to fill the second half seats available with yields consistent with the jet fuel prices that we saw after the conflict. We are in very good shape for the second half; of course, we have significant numbers of seats to sell and are not fully booked for the second half, but the demand environment has continued to hold up despite recent fluctuations in oil prices. We are monitoring that very closely, but we feel very confident that we will be able to achieve the targets that we put forward in the guidance.
Hi, Duane. This is Ricardo. Just to complement on this, another element that we think is going to be very helpful for our second-half results is the ASK growth that we are planning for the fourth quarter, taking advantage of the assets that we already have and using operating leverage. We expect to produce additional revenue with the same assets that we have, and this will also improve profitability. So within this, it is an important advantage for the last part of the year, and that advantage will also help in 2027.
Thank you. Our next question comes from Michael Linenberg with Deutsche Bank. Your line is open.
Ricardo, I heard you talk about the increase in slots at Mexico City for the IATA winter season. Can you just clarify, I think you said the number of operations per hour are going to go from is it 44 to 46 or is it 56? I'm just trying to get a sense of the increase.
Yes, correct, Mike. From 44 to 46; we are starting the next IATA season with that change.
That means around 10 pairs of slots additional to what we have today. It is our share of this increase from 44 to 46, which, as Ricardo mentioned, we plan to use to increase ASKs in the high single digits for the fourth quarter. We will use these slots for the additional wide-bodies we mentioned plus to recover some capacity we reduced in the domestic market. That is the plan for these slots.
Okay. So wait. So the slots are going from 44 to 46 so you are going to get 2 per hour. What is the airport going to do? Or is that the airport? Yeah.
The capacity at the airport is going to increase from 44 to 46 operations per hour. Our share of that increase during the day is 10 pairs of slots. So, keeping our proportional share, this will mean 10 additional pairs of slots for the winter season.
And then just another question. This is on just the accounting. I know in your other revenue it looked like there was a bit of a bump up there. Was that a one-time or an out-of-period type gain? What drove that? Or is that the new run rate for other revenue going forward? I know you talked about the new credit card and the rollout with Visa, so maybe that is showing up in that number.
Hi, Mike. Yes, this line item reflects the success we are having in diversifying our revenue. It includes revenue associated with Aeromexico Rewards — the fact that we have been growing penetration translates into higher revenue here. We also have revenue associated with VIP lounges; we reopened our VIP lounges during the second quarter after remodeling them last year, so we did not have those revenues last year. We also have in that line the revenue associated with the charter operations we performed during the World Cup, where we transported several national teams within Mexico and also from Mexico to the U.S. and Canada. The line item also captures the airline retailing initiatives, including car rental, insurance, and vacation packages. It is a combination of all these factors, including the launch of the new credit card.
Okay. Great. Thank you.
Thank you. Our next question comes from Filipe Ferreira Nielsen with Citi.
Hey. Hello, everyone. Thanks for taking my question. I have two points. I would like to understand a little bit more about the impact, potential impact from fleet utilization on your ex-fuel cost. If you could give us a sense about how this is evolving or improving as you increase capacity into the second half, and how this should impact your guided margins for the period. My second point is a reminder: could you remind us how fuel recapture performed in the second quarter? You mentioned higher-than-expected recapture in the second quarter. Just remind us the number in the second quarter and explain a little bit about the recapture in third quarter and fourth quarter. Thank you.
Okay. Let me take the second part first on fuel recapture. Filipe, good morning. We guided the market back in April that we were projecting to recapture 50% of the incremental fuel pressure. We exceeded that target, achieving a fuel cost recapture rate of 70% in the second quarter. For the second half, in the implicit guidance we provided, we are projecting to recover more of the impact that we had in the second quarter. It was difficult to recover everything in Q2 because most Q2 seats were already sold, which constrained pricing recovery in that quarter. For the second half, with the revenue guidance we have provided, we expect to offset the remaining portion that we did not recover in Q2, and in aggregate recover more than 100% of the original incremental effect over the full year. If you look at the third and fourth quarters, our EBITDA and EBIT projections already show year-over-year growth of around 9% and 11% respectively, which reflects this recapture and our other revenue drivers. For the full year 2026 versus 2025, we will be slightly below 2025 overall, reflecting the significant fuel impact earlier in the year, but the second half is positioned well.
Yes, so I just wanted to understand on your ex-fuel costs implied in your guidance, how does fleet utilization—lower fleet utilization—play out in the whole equation? You are expanding capacity into the fourth quarter; you have lower utilization now. How should this evolve and impact your ex-fuel costs implied in your guidance?
Yes, thank you for the question. We have operating leverage opportunities. Our P&L already takes the ownership cost of the aircraft, but we are not flying them as intensively as we could. As we fly them more, ownership costs remain the same but we produce additional revenue. We also make better use of our crews; we are not necessarily hiring for the fourth quarter — hiring will be more tied to growth in 2027 — so we have cost advantages there. In terms of the fixed cost structure, as we fly these aircraft more and produce revenue associated with them, we have high-margin growth opportunities that we see for the fourth quarter and for 2027.
To complement what Ricardo mentioned, this operational leverage is very significant and will not only allow us to improve margins in Q4 and in 2027 and beyond, but it also demonstrates that we have the assets needed to fund growth for the next several quarters. Thank you.
Thank you. Our next question comes from Giulio Orsi with JPMorgan. Your line is open.
So we have two questions on our side. The first one: can you comment a bit on the competitive landscape for both domestic and international markets?
Hi, Giulio. On the competitive domestic market, we have seen some rationalization of capacity in the second quarter. As I mentioned before, yields in the domestic market did not reflect the fuel environment at the start of the second quarter; in June we started to see better yield support. Going forward, the competitive landscape will also depend on the transaction that is under review by the competition authorities; we do not know where that stands. Our job is to continue strengthening our product and deliver the best competitive proposition for our clients, and we are in very good shape on that front.
Got it. Thank you. And can you comment a bit on demand elasticity across the segments? We are trying to understand if there is still room for further price increases if we continue to see volatility on the jet fuel curve in the coming months.
As I mentioned before, domestic is showing good support for the second half. International demand continues to be strong: very solid bookings to Europe, and our increased capacity to Europe for the summer is performing well. We increased our Seoul service, and Monterrey-Paris is sustained year-round. U.S. flying has also been very solid, as has South America. For Mexico, there was some softness in June, but we are seeing very positive developments for the rest of the summer and for the fourth quarter. We have shown we are flexible and proactive. Our plan is to expand capacity in the fourth quarter, but if fuel prices remain high and demand does not support that, we will not hesitate to reduce capacity. The only thing fully protected are our slots in Mexico City: we will cover them. We were able to reduce domestic capacity in Q2 because we had a waiver due to higher jet fuel prices; that waiver ends for the winter IATA season. If the waiver is not renewed and oil prices remain high, we will fully cover the slots; if the waiver is renewed and oil prices remain high, we will adjust and reduce capacity accordingly.
Thank you. Our next question comes from Jens Spiess with Morgan Stanley. Your line is open.
Hi. Thanks for taking the questions. I have one on the co-branding partner change. All loyalty members will keep their status, but will it take some time for those customers to switch to the new credit card? What are the implications for your financials going forward to correctly model this? Secondly, on the prior question on domestic competition, there appears to be divergent capacity adjustment from your two domestic competitors — one increasing capacity in 3Q and the other reducing it. Would you say you still see discipline in the market?
Hi, Jens. On the credit card, we successfully launched a new co-branded card with Inbursa, and it is progressing according to plan. We are seeing very positive trends and fully prepared for the transition from the prior co-branded partner to Inbursa. Our financials are covered in that sense, and the guidance we provided reflects this transition. One encouraging sign is that half of the cardholders who have received the Inbursa card previously did not have a co-branded credit card — so we are acquiring new customers, not just migrating existing ones. We are also working on the new contract with American Express that is due in the fourth quarter of this year. On the competitive environment, the differences in capacity between the two ULCCs are related to the different timing and impact of their engine issues, which led one to reduce capacity earlier and the other later. In addition, jet fuel has called for rationalization of capacity across the market. We are fully ready to compete regardless of the outcome in Mexico's competitive environment.
It seems that higher jet fuel, all else equal, is a more benign environment for you than for some competitors. As oil comes down, and according to your guidance you're getting close to pre-pandemic profitability in the fourth quarter, going into 2027 if jet fuel normalizes further, would you keep prices at an elevated level to capture higher margins? Also, could you give context on the ASA negotiation and whether you expect to reach a deal soon?
On pricing, we are seeing solid demand consistent with current yields that reflect the higher jet fuel prices observed after the conflict. We are confident we can reach our guidance based on the information we have today. If oil prices go down, that will exert pressure across the industry to lower fares; it is too soon to say what will happen in 2027. We have strong historical profitability even with lower prices and lower yields than today, and we are ready to react. We also have operational leverage that will benefit margins in 2027. Regarding the negotiations with the flight attendants' union, they approved the general assembly framework; individual ratification votes are required and the deadline for those votes is July 30. We are working constructively with the union and are confident we will have a firm agreement before the end of this month.
Thank you. That is all the phone questions that we have for now.
We have a couple of questions from the webcast. One is related to costs and what is driving costs besides fuel. As we mentioned, costs reflect the impact of the exchange rate appreciation and a stronger peso, which is driving several cost items — the peso appreciated versus last year. There are some line items with particularities: for example, maintenance costs this year are higher versus last year in part reflecting the additional fleet that we received last year — we received 25 aircraft. A very important element impacting maintenance cost this year is related to our 'power-by-the-hour' component maintenance programs. We have three contracts — one for our Embraer fleet, one for our 737-8 fleet, and one for our 787 fleet — and all three of them came up for renewal this year. So this year we have an adjustment coming from those renewals, and going forward for the next five to seven years the power-by-the-hour agreements will move in line with certain cost indexes. So we have this particular renewal impact on our maintenance expense this year, and I think that is the main variation on the cost guidance. We also have questions related to cash flow and CapEx. Cash flow generation this year has been very strong: net cash flow from operating activities in the first six months of the year has been even higher than in 2025 despite having around $250 million of provisional fuel cost expenses in the first six months of the year. Going forward for the rest of the year, we continue to expect strong net cash flow from operating activities, in fact we expect net cash flow between $800 million and $1 billion. With that and our CapEx program, we expect free cash flow of around close to $100 million this year. Looking into 2027, if the fuel curve materializes as expected and considering the operating leverage opportunities we discussed, we would anticipate net cash flow from operations could grow materially next year — more than 30% if these things materialize — which would translate directly into additional free cash flow given that CapEx programs for this year and next year are practically similar at around $450 million. That $450 million is around $300 million of maintenance CapEx and around $150 million in other projects.
Well, thank you for joining this call. We look forward to being here again after the summer as we provide our next quarterly call. Have a great summer season, and see you soon. Thank you for joining the call.
Thank you for your participation. You may now disconnect. Good day.