Controladora Vuela Compañía de Aviación, S.A.B. de C.V.
Q1 2021 Earnings Call Transcript

Published: 23 Apr 2021

[Operator:]

Good morning, everyone. Thank you for standing by. Welcome to Volaris First Quarter 2021 Financial Results Conference Call. All lines are in a listen-only mode. Following the company’s prepared commentary, we will open the call for your questions-and-answers. Instructions on how to ask a question will be provided at that time. Please note that, this event is being recorded. At this point, I would like to turn the call over to Ms. Maria Elena Rodriguez, Volaris' Corporate Finance and Investor Relations Director. Please go ahead Mr. Rodriguez.

[Maria Elena Rodriguez:]

Good morning, everyone, and thank you for joining the call. With us today is our President and CEO, Enrique Beltranena; our Airline Executive Vice President, Holger Blankenstein; and our Chief Financial Officer, Jaime Pous. They will be discussing the company's first quarter 2021 results. Afterwards, we will move on to your questions. Please note that, this call is for investors and analysts only. Any questions from the media will be taken on an individual basis. Before we begin, please let me remind everyone that, this call may include forward-looking statements, within the meaning of applicable securities laws. Forward-looking statements are subject to several factors that could cause the company's actual results to differ materially from expectations, for reasons described in the company's filings with the U.S. Securities and Exchange Commission, and the Comisión Nacional Bancaria y de Valores. Furthermore, Volaris undertakes no obligation to publicly update or revise any forward-looking statements. It's now my pleasure to turn the call over to Volaris' President and CEO, Mr. Enrique Beltranena.

[Enrique Beltranena:]

Thank you very much, Maria Elena. Thank you very much to everybody for joining us today. There are five key messages, I would like to emphasize this morning. The first one, in the first quarter of 2021 Volaris demonstrated its ability to adjust capacity, to match demand with a focus on rebuilding total revenue per available seat mile, after the second wave of the pandemic. Throughout the first quarter, Volaris demonstrated flexibility and promptly adjusted capacity in face of a volatile demand environment. We finished the quarter operating 88% of the ASM capacity flow in the first quarter of 2020, exceeding the guidance of 80% provided in our last call, and far better than any public operator in North America. For the month of January capacity measured by available seat miles was 97% of the same period of 2020. After the Christmas holiday season, specifically in mid-January, we observed, an increase in COVID-19 cases both in Mexico and in the United States, which negatively affected the demand for air travel. Even more so, when stay-at-home city orders and travel restrictions were enacted. Soon as the restrictions were implemented during February, we drastically reduced total capacity to 75% of ASMs versus the previous year. Moreover, we shifted 35% of our international capacity back to the Mexican domestic market, which proved to be the right course of action.

[Holger Blankenstein:]

Thank you, Enrique. The first quarter had two distinct periods, with the first half being very challenging in terms of demand, but the second half had a meaningful pickup, as COVID case counts declined and vaccination rates in the U.S. accelerated. We reacted fast to the second wave by reducing capacity at the end of January and into February and reinstated capacity during March and April to take advantage of the improvement in customer confidence, driving demand.

[Jaime Pous:]

Thank you, Holger. Now I will continue the discussion of our results in accordance with the figures filed with the Securities and Exchange Commission and Comisión Nacional Bancaria y de Valores. I am excited as our recovery continues and our focus is now shifting from stabilizing the company's financials to operating value, while returning to profitability, generating cash and starting to grow again. From a seasonal standpoint, the first quarter of the year historically Volaris' most challenging in terms of profitability and this year, it was aggravated by the pandemic's impact on demand especially during February. Total operating revenues for the first quarter were MXN6.4 billion, representing 89% and 82% of 2019 and 2020 total revenues reported in each period respectively. CASM ex fuel for the first quarter increased by 15.7% versus the same period of previous year closing at US $4.78. This increase is explained by the capacity reduction implemented during the quarter. All other controllable cost items are in line. Total US CASM for the quarter went up 5.6% versus the first quarter of 2020, closing at US $6.60 also as a consequence of the decrease in capacity. Please note that decrease versus the fourth quarter of 2020 is driven by higher jet fuel prices and lower capacity. Volaris is still one of the lowest unit cost operators in the world. This lowest cost structure is the backbone of our sound business model. Moving on to profitability numbers. EBITDA in the first quarter was MXN1.3 billion, resulting in an EBITDA margin of 20%, which compares with 27% in the same period of 2020. It is important to note that the 2020 quarter was not significantly impacted by the pandemic. EBIT in the first quarter was a loss of MXN739 million, representing a negative EBIT margin of 11.5%. Net loss for the first quarter was MXN733 million with a negative net margin of 11.4%. Volaris has the strongest balance sheet profile among the Mexican carriers. At the end of the first quarter, the company registered a negative net debt of MXN3.2 billion, excluding lease liabilities recognized under the IFRS 16 adoption and total equity of MXN1.2 billion. As of March 31st, 2021, cash and cash equivalents were $423 million, representing 42% of the last 12 months' operating revenues. In our last call, we guided for an average daily cash burn of $1.2 million during the quarter. But we over delivered keeping that figure to approximately $900,000 per day a result of our strong sales during March. In this quarter, Volaris repaid approximately $142 million of working capital relief receivable goods and services provided during 2020. Also during this quarter, $100 million of additional working capital relief was achieved through agreements on new payment profiles with our lessors in line with our liquidity preservation program. Contrary to other Mexican carriers, by the end of the first quarter, our suppliers' liabilities were equivalent to 22 days of OpEx and on a path to pre-pandemic level. As our guidelines, we are budgeting up 100 total aircraft by year-end; EBITDAR margin for the second quarter in the high 20s; an average daily cash burn for the second quarter of approximately $600,000 per day; and reaching cash flow breakeven or even positive in the fourth quarter of 2021; finally, CASM ex-fuel level similar to 2019 by the end of this year. Our focus today continues to be cash preservation and return to profitability. During the first quarter, the company incorporated one A320neo ending the quarter with a fleet of 37 aircraft with an average age of 5.5 years. For the remainder of the year, we expect to receive three new aircraft from our purchase order with Airbus. In addition as Enrique, mentioned we plan to incorporate eight additional A320neos to our fleet in 2021 through a straight operating leases. Additionally, we extended for 12 months the leases of two A319neos, which are currently contributed to fill the void in the market. The company is currently evaluating further market opportunities and incorporate additional healthy capacity. As a general guidance, the eight neo aircrafts are budgeted to be neutral into TRASM and CASM levels. The plan with this aircraft is to reinforce our market so as a result 80% of its utilization will be in our current core network, especially, reversing capacity in Mexico City. Note that the leverage measured by adjusted net debt-to-EBITDAR will have a temporary impact of around 1x gradually returning to network levels over a 12-month period. Our new aircraft transition plan continue driving fuel efficiency towards a lower CASM and support our environmental commitment since this aircraft post an average combined fuel efficiency of 20% per seat and nearly 50% reduction in engine noise and nitrogen emissions, which are 50% below the current industry standard. We expect approximately 42% of our fleet to be fuel-efficient A320neo family by December 2021. The company is committed not only to deliver growth during the next years, but also to reduce our carbon footprint and to continue tying our business with our local communities. To better convey, our ESG commitment we will release an integrated annual report along with our 2020 Annual Report. Now I'll pass it back to Enrique for closing remarks.

[Enrique Beltranena:]

Thank you very much, Jaime. We believe March was an inflection point in terms of passenger demand and TRASM levels. Looking ahead assuming that the passenger demand recovery trend holds we see a path to returning to operating profitability. Important to recall you that when Mexicana went bankrupt in 2010, the market quickly absorbed the capacity void and in less than a year the passenger levels have bounced back. Back then Volaris took fast and efficient advantage of that market opportunity. Here we are once again. We are quickly recovering our capacity, carefully managing the ramp-up costs. As a team, we are obsessed to finding ways to increase efficiency, drive productivity, but our important target of growing the company is here today and we will take advantage of it. I want to express my sincere gratitude to our family of ambassadors, the Board of Directors, investors, our bankers, lessors and suppliers for their commitment and support that has gotten us to this exciting position with such a unique opportunity in our markets. We are at the beginning of the runway and we will start growing back again. Operator, please open the line for questions.

[Operator:]

We'll take our first question from Helane Becker with Cowen. Please go ahead. Your line is open.

[Helane Becker:]

Thank you. Can you hear me?

[Enrique Beltranena:]

Yes. Good morning, Helane.

[Helane Becker:]

Good morning and thanks very much for your time. So kind of still wondering how much ticket pricing pressure there is in the market and how you're thinking about getting yields back to 2019 levels, or I don't know, if demand is really strong are you thinking about it from a just raising ticket prices?

[Holger Blankenstein:]

Helane, so there's a couple of things happening with ticket prices. In the first quarter, clearly demand was relatively low and to stimulate the remainder of demand, we reduced yields and ticket prices. We did make up some of that loss with ancillary revenues. As you see our ancillary revenue percentage is now close to 50%. As we move into the second quarter and we see strong last-minute demand, we are able to improve the pricing environment for our ticket and we're seeing higher ticket prices on that last-minute demand. Into the summer, we are seeing relatively optimistically into the summer with strong booking curve and we believe that we will be able to recover some of the pricing environment in the market. For TRASM, in the second quarter what we're now looking at is returning close to 2019 levels for the second quarter which is earlier than we had expected.

[Helane Becker:]

Holger, that's very helpful. Thank you very much. And yeah. Thanks. That was my list to kind of my questions. So appreciate the time.

[Holger Blankenstein:]

Understandable to be in shock Helane that we are targeting to be there second quarter.

[Helane Becker:]

Okay. I don't think its shock, I think its exhaustion. I think I appreciate your help. I'll talk to you later.

[Operator:]

We'll take our next question from Duane Pfennigwerth with Evercore ISI. Please go ahead.

[Duane Pfennigwerth:]

Hi. Thanks. Appreciate the time. The line was a little bit difficult to hear for a period of time. It might have just been mine, so I apologize if I ask you something that you've already communicated. But it looks like 2Q, 3Q schedules are showing about up 10% in capacity year over two. Can you just sort of update us on your latest thinking on capacity in the next couple of quarters?

[Holger Blankenstein:]

Yes, Duane. So for the second quarter we are currently seeing 110% of 2019 capacity. And this will put us back to the full potential of our fleet in terms of ASMs per aircraft per day with its respective impact on CASM. And this is one of the highest productivity of any stage length -- a similar stage line carrier in the world. For the third quarter, Enrique and Jaime mentioned that we are adding eight additional aircraft, so we should see higher growth for the second half of the year.

[Duane Pfennigwerth:]

Got you. And then just competitively, we watched our web tracker data pretty closely. And I don't know for a couple of months now Mexico has been up relative to 2019 on that web tracker. And it's really the only region that we see that level consistently you and your peers. And so I guess the question is, what are you seeing competitively in terms of discounting further out on the booking curve maybe operating for cash generation as opposed to sort of RASM maximization? And then you touched on it in Helane's question, it sounds like close in you're able to sort of yield up. But if you could just comment on Q2 and to the extent that there are forward yields that are kind of below what you think they might need to be? Thank you.

[Holger Blankenstein:]

So on the market capacity side, Duane just as a reminder, the market is -- still has a gap of around 50 Volaris equivalent A320 in order to backfill the capacity that was left by weaker competitors. That's on the capacity side. So yes, we are recovering fast. All the other competitors are also recovering.

[Duane Pfennigwerth:]

Sorry it wasn't a capacity comment. It was actually a web tracker activity comment right? So activity which we think is a pretty good proxy for bookings is up year over 2. Not capacity sorry about that.

[Holger Blankenstein:]

Right. And on the demand side at the current rate of recovery we are optimistic that demand will completely recover this year, especially in the domestic market and with the gap quickly closing as well in the US Mexican market. We are seeing some points of strength, which are the leisure destinations in Mexico both in the domestic market as Mexicans go to the beach destinations, but also Southbound by US carriers into the leisure destination. And then, we've also seen quite a strong recovery of northbound traffic both on the VFR side, and the leisure destinations in Texas, Nevada and California. So even on the international side in our core markets, we are seeing a relatively strong recovery.

[Duane Pfennigwerth:]

Sorry, just to put a bow on that – go ahead sorry.

[Enrique Beltranena:]

Duane, I don't know, if you heard me that, yes, I mean, the shift in terms of TRASM from February – from the beginning of February through the end of March was 70% up.

[Holger Blankenstein:]

And that's precisely a testament to that last-minute demand that we're seeing. As you mentioned, the further out bookings are still somewhat soft are improving as travel confidence returns, but are still softer than what we saw in 2019. That is being compensated by relative – very strong last-minute demand, which enables us to yield up. And that's what I was mentioning to Helane. We're seeing travel recovery to 2019 levels with that strong last-minute demand.

[Duane Pfennigwerth:]

Okay. Appreciate the thoughts. Thank you.

[Enrique Beltranena:]

Thanks, Duane. Thanks for your questions.

[Operator:]

Our next question from Josh Milberg with Morgan Stanley. Please go ahead.

[Josh Milberg:]

Hey, everyone. Thank you for the call and congratulations on the phenomenal results. Just on the – and sorry team, just on this, but just on this TRASM performance and that was a pretty remarkable kind of turnaround from early February to March. But I was just wondering, if you could talk a little bit about how your performance varied between domestic and cross-border US on the yields and the unit revenue. And then also maybe a little bit of a comment on, just how the Easter high season played into that the question of the rebound. That's my first question.

[Holger Blankenstein:]

On the domestic-international split, the international was definitely weaker in the first quarter, with some rebound in the late quarter – in the late weeks of the quarter. We are now rebounding into April and March – April and May. You've maybe seen the schedules, we've added approximately 30% more than 2019 into the US market, and we're seeing a strong rebound of international, more in the second quarter than in the first quarter. The domestic has held up better in the first quarter, and it continues to be relatively strong in the second quarter, with that very strong last-minute demand that was already mentioned in previous questions. The Easter high season saw the same profile with very, very late bookings, I would say, in the second half of March, materializing into the Easter season, which was the last week of March, and the first week of April this year.

[Josh Milberg:]

Okay. That's great. I appreciate that detailed response. And then, the second thing I wanted to raise with you guys was just on the big fleet addition. Obviously, that's a major sign of confidence. I imagine that, it may also be driven by the interest of getting ahead of some of your competitors. And I just wanted to one ask you, if you could – you did mention in the release that one impetus for that move were the favorable leasing market conditions? And I was hoping you could just give some detail there. And then, if you could also just talk about what you're seeing from your competitors on the fleet side. And I think that, there was even a recent report suggesting that Interjet is looking at restarting its operation. I don't know, if you can comment on that development. But maybe if nothing else, you could give a little bit of a comment on what you're seeing from competitors in general on the fleet side.

[Enrique Beltranena:]

So, as we have explained, I mean, the process of Interjet disappearing from the market and Aeromexico restructuring, we've seen more than 33%, 34% of the fleet leaving the market, okay? We went out and initially what we have looked at was a possibility of doing power-by-the-hour leases on traditional CEO aircrafts. But as things start evolving the company was able to get very good rates on A320neos and those aircrafts are here to stay for the next 10, 12 years. We decided to take advantage of that. The idea of having power by the hours at the beginning was good because we didn't know what the market was going to be and the recovery of the market. But with the progress of the vaccination and everything, we see the market recovering faster now. And as a result of that we decided to go ahead and hire those eight aircraft on a permanent basis rent them on a permanent basis, straight leases, and as I said, with very good, I would say, lease rate factors, okay? Speaking about our competitors, I would say, Aeromexico remains on its plan shrinking down to somewhere around 82, 83 shelves through the end of this year. We have seen -- we know where VivaAerobus is they added a total of 13 A321 from January 2020 to December 2021 and that was compared with 15 aircraft from Volaris. We have heard rumors that they are in the process of trying to bring five new shelves by the end of the year. That's still not contractual. The rest of the market Aeromar continues being very constrained, and we have basically no news from TAR, but we know they're financially very strong.

[Josh Milberg:]

Very good. Thank you for that, Enrique.

[Operator:]

Question from Stephen Trent with Citi. Please go ahead.

[Stephen Trent:]

Hi. Good morning everybody and thanks so much for taking my questions. Two quick ones for you guys if I may. The first is could you remind me what percentage of your tickets pre-pandemic were refundable and whether or not that might change going forward? And that would be my first one if I may.

[Jaime Pous:]

Sure, Steve. I mean, when we started the pandemic if you look for March to March, we issue around MXN 3 billion in vouchers. Remember that we provided the customer the option to get the cash refund to get a voucher plus 25%, or to change the ticket without any charge. From those MXN 3 billion that we issued, there's only remaining MXN 372 million that they haven't billed in.

[Stephen Trent:]

Okay. That's super very helpful. And just the second thing real quickly certainly given you're very good, very good competitive positioning how are you thinking about acquisitions longer-term? I mean, I don't really mean other airlines, but you talked about the chatbot and boosting your app. Do you see anything acquisition-wise on the electronics side or carbon capture type programs or something like that longer-term? Just would love your thoughts on that.

[Enrique Beltranena:]

Look Steve, we are focused on our own business and developing our own business and growing our own business, pushing it up to 100 total aircraft by year-end, improving our EBITDA margin for the second quarter in the high 20s, protecting our daily cash burn for the second quarter. We have a high focus on that. And Jaime has promised us a great achievement if we get back to our cash levels of 2019 in the second quarter. I would like the entire team to be absolutely focused on these four priorities.

[Stephen Trent:]

Okay, that superb, very helpful, Enrique. Let me leave with there. And thanks again guys.

[Enrique Beltranena:]

Thank you, Stephen.

[Operator:]

We'll take our next question from Mike Linenberg with Deutsche Bank. Please go ahead.

[Mike Linenberg:]

So, hey, yeah, Good morning everyone, Jaime, I want to go back to the comment that you made about EBITDAR in the high 20s. Was that June quarter, or is that full year, or is that year end?

[Jaime Pous:]

The entire second quarter, Michael. The June quarter, yes.

[Mike Linenberg:]

Okay, okay. That's helpful. And then, let me just see here. Jaime, you said that, you're budgeting for 100 aircraft. Enrique, I heard you say, 100 or maybe even more. We now know that you have 98, based on the press release from two days ago. But that press release also indicated that, you're evaluating further market opportunities to add additional aircraft. So I guess, it looks like that, maybe you're looking for another two or maybe you're looking for more. So, one, can you give us a sense of how many more airplanes? And maybe it's only two. But then, what are the additional opportunities? It looks like these eight are the Mexican market. Are these additional for Central America International or U.S., or...

[Enrique Beltranena:]

So Michael, the way we work this is, we went through a process of evaluating market opportunities one-by-one.

[Mike Linenberg:]

Okay.

[Enrique Beltranena:]

Once we have the total ASMs, we drove back to the number of aircraft that we needed.

[Mike Linenberg:]

Okay.

[Enrique Beltranena:]

And that's how we arrived in terms of certainty to HLs.

[Mike Linenberg:]

Okay.

[Enrique Beltranena:]

We see more opportunities, but we want to be cautious.

[Mike Linenberg:]

Yeah, yeah.

[Enrique Beltranena:]

And cautious in the way we see the demand recover, and cautious in terms of what the third wave could be, okay? So as a result of that, we are playing safe with these eight aircraft. We are absolutely convinced that it's lower than what the market needs. But, that doesn't mean that, given the process of ramping up the demand in the next three months, we will probably come back and tell you guys, that we are doing something else.

[Mike Linenberg:]

Okay.

[Enrique Beltranena:]

Absolutely the absolute focus as Jaime said is, going to be to put those shelves back into the Mexican market. But we see additional opportunities both, into the U.S. and the Central American markets. And I think we want to keep ourselves the flexibility based on demand. And remind you guys that, the capacity gap is of about 50 shelves, of Volaris' equivalent A320s to backfill the gap that was led by the weaker competitors. And then, I think the very important statement that I made at the end, in 2010 when Mexicana left the market, it took the market about a year to fulfill the bucket that Mexicana left.

[Mike Linenberg:]

Yeah, yeah.

[Enrique Beltranena:]

And we did it very well by 2010. And we want to do it very well again this year.

[Mike Linenberg:]

Okay. Very good. A question this is back to, Jaime. I had a question about, the -- your monetary liability position. Last quarter, we saw the peso -- so the December quarter I should say we saw the peso actually appreciate nicely versus the dollar and you took a sizable gain. We then saw a reversal in the currency and yet you still took a gain. It was a much smaller gain. And so I just -- historically I thought that you had a sizable dollar asset that more than offset your dollar liability. What -- has there been a change, or...

[Jaime Pous:]

No change there Michael. There's no change there.

[Mike Linenberg:]

It's just the way it's balanced out, in the movement of the currency, or...

[Enrique Beltranena:]

It's because the bounce was in the first part much heavier than the second part, okay? But in reality there's, no changes. The decision of the company in terms of dollar on the balance sheet remains pretty much the same.

[Jaime Pous:]

That's correct.

[Mike Linenberg:]

Okay. That makes sense. There is a lot of moving pieces. And this is how the network. Okay, that makes sense then. All right. Thank you very much.

[Enrique Beltranena:]

Thank you, Michael.

[Jaime Pous:]

Michael thanks for your questions.

[Mike Linenberg:]

Oh of course, Enrique and Jaime.

[Operator:]

We'll take our next question from Rogério Araújo with UBS. Please go ahead.

[Rogério Araújo:]

Yes. Hi, guys. Congratulations on these very strong results. I have a couple. One is can you talk a little bit about the main drivers for ancillary revenue? Last quarter, you had mentioned some of -- some new service operations to consumers, like insurance flexibility, fare combos, COVID-19 testing. So, is it the same that are driving ancillary revenue up? And then, your view on the sustainability of this level of ancillary revenue going forward, only for us to have a better view when the market normalizes. If we're going to have yield improving but at the same time ancillary revenue decreasing, or if for somehow you can sustain higher ancillary revenues after market normalization? That's the first one. Thank you.

[Holger Blankenstein:]

So, on the ancillary question, yes, we are seeing a lot of uptake on the product that we launched during the pandemic, mostly around flexibility and some of the insurance combos absolutely. And we are seeing the full run rate of those products in this year with the uptick in ancillary revenues. Our intermediate target is to get to around $40 per pax. We're now at $37. As we grow the international schedules, where there's typically more purchase of ancillary products that should be achievable. That's in our pipeline. Now having said that, as the base fare increases into the high season of the summer and recovers for the remainder of the year, the percentage of ancillary revenue as a percentage of total operating revenue might go down somewhat. We're targeting right now to remain above 40%, probably around 42%, 44% for the remainder of the year. But that's mostly attributable to the rise in base fare. We also continue to develop our dynamic pricing scheme for ancillaries, which has been tremendously successful with some artificial intelligence tools to predict pricing power of certain ancillary products for certain customer segments. And we're also working very hard on personalizing ancillary offers for certain customer segments.

[Rogério Araújo:]

Okay, pretty clear. Thank you so much. So my second question is on the slots from Interjet in the major airports in Mexico, mostly Mexico City. Are they available already to other players? So, when you say you're taking advantage to add this capacity, you are already taking those slots? Is that a fair view on that matter?

[Enrique Beltranena:]

Basically the slots are owned by the airport. They are not an asset from many other airlines. Obviously you get the right of use. So far, whatever we have requested for the summer season has been granted to Volaris. This is still at a space compared to the operations that were taking place during 2019. Obviously in peak seasons like the Easter holiday, it got almost to the level. But so far, they run the slots on a season basis, we have run whatever we had requested. There's an exception of the juice it or lose it rules on the AITA rules, which I believe is going to expire in the summer. The exception was mostly due to the COVID situation. But, in order to be able to get the slot, you also need to be current on any debt that you have with the airport. So we believe that there's still some space to continue growing on the slots.

[Rogério Araújo:]

Okay. And every time you get those slots, it's -- if you continue flying them, it's guaranteed that you're going to remain with those. Is that correct?

[Enrique Beltranena:]

It's not guaranteed. You need to use them and operate it on time. If you don't comply with the use of the time you will lose them.

[Rogério Araújo:]

Okay, great. And one last thing, if I may, on the lease -- on the cost of leases. So, almost 10% of your fleet is going to be under these new contracts by year-end. Should we expect a reduction in the average cost of lease per aircraft?

[Enrique Beltranena:]

In those eight, aircraft yes, there's a reduction. But remember, its sale of almost 98. We're real economic -- really good economic terms of those eight aircrafts.

[Rogério Araújo:]

Okay. Congratulations again. Thanks very much. Have a great one.

[Enrique Beltranena:]

Thank you, Rogério.

[Operator:]

We will move next with Pablo Monsivais with Barclays. Please go ahead.

[Pablo Monsivais:]

Hi guys. Good morning. Thanks for taking my questions. I have two quick questions. The first one is, it looks to me that you have more aggressive approach in terms of your expansion in Mexico City. What types of routes are you looking for to cover there? Are you looking for more the BFR, the leisure to strengthen the Mexico Cancun or Los Cabos? What's your games plan for your expansion in Mexico City? That will be my first one. And my second one is a bit on the -- on your plans to expand in Colombia Salvador. Where should we -- what should we expect from those planting in the next couple of quarters? Thanks you.

[Holger Blankenstein:]

So on your Mexico City question, we are currently at 27% domestic seat share in Mexico City, 22% total seat share, if you add the international market, which is still relatively small compared to our overall market position in the country. We have been growing in Mexico with additional capacity and there it's important to note that we are not changing our network. We're not changing our business model. We are focusing on our core market which is the price-sensitive leisure customers. So we're adding capacity to Cancun Los Cabos, Puerto Vallarta and the VFR market. So, you'll see Tijuana additions to some of the secondary cities in the center of Mexico. On top of that, we're also backfilling capacity that was left over in the international market. You might have seen significant additions to Texas both to Houston, San Antonio and Dallas, as we look at backfilling capacity that was left over by weaker competitors. So that's on Mexico City. We do see continued opportunity to grow our business in Mexico City and our position in Mexico City. In Colombia, we have asked for authorization to start operations to Colombia this year. We were granted that authorization last week. And we are now looking to start initiate operations probably to a very small extent. We've been granted authorizations for both Volaris, Costa Rica and Volaris, Mexico. So you might see some additions of itineraries from Mexico and from San Jose, Costa Rica. Typically, we start operations on a very, very small basis and then start growing as we stimulate demand.

[Pablo Monsivais:]

Perfect. So you're basically testing the market. To be more specific in Colombia, are you planning to go to Bogotá or more like a leisure market there or Medellin? What's your strategy for this first phase?

[Enrique Beltranena:]

So today, we did get the approval for the general operation. We will be defining the city pairs and announcing the city pairs, when we have the legal approvals specifically for those.

[Pablo Monsivais:]

Okay. Thank you.

[Enrique Beltranena:]

Thank you, very much.

[Holger Blankenstein:]

Thank you.

[Operator:]

No further questions over the phone at this time. I would like to turn the call back to Mr. Enrique Beltranena for any closing remarks.

[Enrique Beltranena:]

So, I want to express really my sincere gratitude to all of our investors during these very difficult times that we went through. And we are excited as our recovery continues and our focus now shifting from stabilizing the company's financials to creating value by returning to profitability, generating cash and starting to grow again. Thank you very much for everything you did for us in this period, for your tremendous support, especially during the capitalization period. And thank you very much for speaking to us and we welcome any other potential investors from now on.

[Operator:]

That concludes today's conference. Thank you for your participation and you may disconnect at any time.