Good morning, everyone. Thank you for standing by. Welcome to Volaris' Fourth Quarter and Full Year 2022 Financial Results Conference Call. All lines are in listen-only mode. Following the Company's presentation, we will open the call for your questions-and-answers. Please note that we are recording this event. This event is also being broadcast via a live webcast and may be accessed through the Volaris website. Those following the presentation via webcast may post their questions on the platform. The Management team will answer them during this call or the Volaris Investor Relations team will answer them after the conference call is finished. To send your questions via the webcast platform, click on the question mark below the video area - in the upper left corner. I would like to turn the call over to Ricardo Martinez, Investor Relations Director. Please go ahead, Ricardo.

Good morning, everyone, and thank you for joining the call. With us 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 fourth quarter and full year 2022 results. Afterward, we will move on to your questions. Again, please note that this call is for investors and analysts only. Before we begin, please remind 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 results to differ materially from expectations. As described in the company's filings with the United States SEC, and Mexico's CNBV. These statements speak only as of the date they are made and Volaris undertakes no obligation to update or modify any forward-looking statements. As in our earnings press release, our numbers are in U.S. dollars compared to the fourth quarter of 2021, unless otherwise noted. And with that, I will turn the call over to Enrique.

Thank you, Ricardo and everyone, for joining us today. We are pleased to be speaking again after seeing many of you in New York for our Investors Day in early December. In the few months since then, you have undoubtedly heard from our peers about global airlines' prevalent challenges as they look across 2023 and beyond. We are not in the same position. As we recap our full year 2022 and turn to our expectations for this year, Volaris has taken the necessary measures to ensure stability and profitable growth. We prepare for our growth by hiring and training almost 1,500 pilots and over 2,800 flight attendants among others in 2022 alone. Our net debt will remain stable in 2023. Our leverage is well below industry levels and will drop sequentially in the upcoming quarters. We have a strong balance sheet and cash generation capabilities with a conservative debt position and healthy financing conditions. Our new fleet financing is signed until 2025 and cover sales and lease backs and CapEx associated with pre-delivery payments. 91% of our total debt is related to long-term growth through lease liabilities, with no exposure to rising interest rates. In addition, in April, we will enter a new era for Volaris receiving the first NEO delivery from the largest ever Airbus order placed by us along with Indigo's portfolio airlines allowing us to reduce our CASM ex-fuel going forward through improved fleet ownership costs. Our fleet plan aims to drive further efficiencies, low cost going lower. Bottom line, we remain committed to delivering sustainable and profitable growth in a disciplined manner. The combination of a differentiated revenue management strategy and strict control of costs, enable our operating earnings to offset the around $550 million of full year fuel price impact, resulting in a margin of…

Thank you, Enrique, and good morning. Despite the mentioned challenges, we diligently accomplished what we planned in 2022, growing capacity into the mid-20s, while holding controllable cost nearly flat. We finished the year driving profitability with a solid fourth quarter. Let me give you more color on the quarter, starting with capacity. As Enrique mentioned, ASMs increased by 18% year-on-year for the entire network. This figure includes 16% growth in domestic and 24% growth in international markets. Critically, this expansion wasn't dilutive, exhibiting a solid 87.3% load factor, up from 86.9% in the fourth quarter of 2021 and demonstrating that our new routes and deepened frequencies continue to attract demand. Our diverse network encompasses Central and South America, allowing us to pursue profitable growth despite domestic market constraints. Given the outstanding demand for flights to and from those regions, we successfully passed through incremental fare increases in our international markets. In the fourth quarter, we launched three new routes that connect our Central American markets with significant Latin American communities in the United States, San Pedro Sula to Miami, San Salvador to Houston and San Salvador to Auckland. We are very excited about these routes, as they embody the strong trends we are seeing in the VFR travel and the recovery and growth of the Central American market. Our International markets across Central America, South America and the United States continue to exhibit strong demand. Domestically, the routes we launched in 2022 from Toluca and Felipe Angeles are maturing as expected. We maintained around 30 aircraft flying from Mexico City International Airport and we'll continue in 2023. We saw unit revenue grow in tandem with capacity in the fourth quarter with TRASM increasing both year-on-year and sequentially to $0.086 from $0.084 in the fourth quarter of 2021 and $0.082 in…

Thanks, Holger. I want to discuss our fourth quarter and full year 2022 financial results, highlighting our strong financial performance despite the fuel price headwinds we saw throughout the year. We accomplished guidance on every line, particularly on our revenue and CASM ex fuel growth. Total operating revenues for the fourth quarter reached $820 million, a 22% increase compared to 2021, driven by higher unit revenue. For the full year 2022, Volaris reported total operating revenues of $2.8 billion, an increase of 29% compared to 2021 levels, in line with our guidance despite the aforementioned economic volatility. EBITDAR margin for the fourth quarter increased 2.4 percentage points sequentially to 25.2%, though it fell 11.7 points compared to the same period of 2021 attributable to higher fuel costs. EBITDAR for the quarter totaled $207 million, an increase of 19% sequentially, though a 70% year-on-year decrease. Overall, for the full year 2022, the EBITDAR margin was 20.6%, a decrease of 16.1 percentage points compared to the 2021 figure. To note, our 2021 fuel prices, the EBITDAR margin, would have been nearly 37%. EBITDAR came in at $586 million, a decrease of 27% compared to 2021. Higher fuel cost drove total CASM to $0.08 for the fourth quarter, a 21% increase compared to the fourth quarter of 2021. Our average economic fuel cost increased by 45% year-over-year to $3.71 per gallon. Overall, for the full year 2022, Volaris registered a total CASM of $0.0795 compared to $0.0645 in 2021. Average economic fuel cost for the entire year surged 68% to $3.80 per gallon. While we are seeing jet fuel prices contract as we move through the start of 2023, we expect them to remain above 2021 levels, with crack spreads also remaining at higher levels. We will continue managing controllable expenses, increasing our…

Thank you very much, Jaime. To finish today, I would like to remind everyone that our triple goal from Investor Day to double revenue, EBITDAR and free cash flow from 2019 levels by 2025, remains top of mind for our team. Notably, we are 58% of the weight doubling revenue as of December 31, 2022. And our 2023 guidance shows that we expect to advance significantly in EBITDAR and free cash flow generation this year. No matter the environment, we remain disciplined on costs, prudent with capital deployment and focused on rewarding our customers and investors. I want to finish thanking our ambassadors for their significant contributions in 2022. I firmly believe that we have a remarkable group of hard working ambassadors and committed shareholders within our family. Thank you very much for listening and for all your contributions during 2022. Operator, please open the line for questions.

Thank you. [Operator Instructions] Our first question comes from Duane Pfennigwerth with Evercore ISI. Please go ahead.

Hi, thank you for the time. So, we noticed some changes or maybe volatility in the schedules into the second quarter on Mexico to U.S. capacity and I wonder, I know you made some brief comments in the call, but has there been any movement on kind of the CAT2 upgrade? Is there any chance that that gets accelerated?

Duane, thank you very much. This is Enrique. We have seen the process going on really well. I mean basically, as we said, I mean from the 39 points that were raised by the FAA, there's only 10 missing from which about half of them are related to the law and the other half are our systems and things that need to be put in place. We've had - the FAA here a week ago, which went through the process, and now they are planning to come back by the end of March and once they come back and provided that they decide to go ahead and raise the category, there is a couple of months that requires, I would say the process to go through into the U.S. government authorities. And then we'll probably have a resolution. I need you guys to remember that once that happens, we still need to sell the routes. So, ramping-up capacity from our perspective results is something only that is going to happen by the last quarter. Okay. So, that's I would say the fastest process that we can think about.

Okay, that's great. So, that's kind of consistent with what you've said in the past. And then I wanted to ask you just a fleet-related question on the A321s, maybe for Holger, you know, what sort of missions or what sort of markets are best suited for these A321s larger gauge A321s met with them and the network or are there some markets where kind of the margin profile is you know is less attractive? And then, can you just speak generally to lease rates that you're seeing on these A321s that you're taking delivery of and how that compares to the lease rates on the aircraft that are out the door redelivering?

Duane, thank you. This is Holger. So, on the A321 missions what we've done in this year is, we've changed the mission to longer stage length. So, that gives us a better cost profile, in terms of generating more ASMs per aircraft per day, makes the seat more productive, and as we see a lot of strength in the U.S., Mexico market, we did change the allocation of the A321 to more U.S. flying as well and more Tijuana flying. So, we've slightly changed the mission profile of the A321 to the benefit of costs and revenues. And then I'll pass it over to Jaime for your question on - lease rates.

Hi Duane, on lease rate factor, Duane, remember the first deal that we signed, we signed it before they were flying in 2015 and once we're at the tail point on the market, the new ones that we are getting are substantially below that range. We are going to start getting the benefit going forward on that. In addition, as we mentioned in the call, we are getting the benefit of receiving the Indigo order aircraft, and the sale and leasebacks are based on those NEO prices that we got from Indigo.

Okay. Thank you.

Our next question comes from Helane Becker with Cowen. Please go ahead.

Hello, thanks, operator. Hi, everybody. I hope all is well. So maybe this is easier. I just have a couple of questions here. Can you say what percent of the increase in CASM ex is related - for 2023 is related to labor cost increases and are there any other headwinds we should know about?

Most of the CASM increase is related to the fleet and basically on the delivery expenses and depreciation, not related to the labor. The labor doesn't affect or impact increasing the CASM ex for 2023, it's mainly fleet predelivery expenses, maintenance and a little bit airport costs in particular for international operations.

Okay, that's very helpful. Thank you. And then my other question is probably for Holger. I think Holger, you said that you are moderating fares in your core domestic market, and I think I want to make sure I got this right, raising fares in the international markets. Can you say, A) if that's correct and B) can you say whether or not there is greater uptick - uptake rather on ancillaries in international versus domestic or is it about the same?

So, Helane, this is Holger. Regarding the fuel pass through, we've been quite successful given the strong demand in international markets, to a company that's with the fare increase also in the U.S., Mexico, as well as the Central America U.S. markets, and loads continue to be very healthy despite fare increases. In the domestic market, we have a two-sided picture. We have the trunk fleets that are completed and there we opted to go for high load factors, stimulate volumes, stimulate markets, and maintain our base fares quite low, and volume generates higher ancillary revenues, right, because - people buy additional services after they buy the ticket. And then we have 46% of our routes that are without competition, that only compete against buses. And there we have a little bit more flexibility on the pricing side and we have taken advantage of that in the domestic market as well. So, that's what's happening. On the pricing side, if you look at the ancillary revenues per passenger, typically what we see in the international markets, ancillary revenues per passengers are higher as well, because people just take more bags on their international trips.

Got it, okay. Thanks, Holger. Thanks, team. That's all very helpful.

Thanks Helane.

Thank you, Helane.

Our next question comes from Michael Linenberg with Deutsche Bank. Please go ahead.

Hi, good morning. This is actually Shannon Doherty on for Mike. So, it sounds like demand for the March quarter is strong in Mexico, can you update us on demand profile in Costa Rica and the El Salvador operations? And are some of the approximately eight aircraft you are taking this year expected to be used under these AOCs to serve the US market? Thanks.

Sure. This is Holger again. So, what we said in the past is that the Central American recovery is six to 12 months behind what we saw in terms of recovery from COVID in Mexico and the U.S. So, we are seeing a strong rebound of demand in our AOCs in Central America that is reflected in the high load that is seen in the traffic reports in the past months. So, we are quite happy with the development and the recovery in Central America. We will allocate additional capacity to Central America this year. We currently have six aircrafts flying in Central America, and we expect that some of the deliveries this year are going to go through Central America as well. Actually we have announced two new routes, as Enrique mentioned in his script and we will continue to develop our network in Central and in South America.

Great thanks, that's helpful. And on the news about Aeromar, I know that they may not have been really a notable competitor to you guys. But can you just comment on how its bankruptcy may impact you? Maybe you pick up some share between Mexico City and the beach destinations, any color there would be helpful?

Yes look, this is Enrique Beltranena. We feel very sorry about the cease of operations of Aeromar and what we're doing right now is helping the government with the stranded passengers and we have allowed their former employees to apply for the jobs in Volaris, provided obviously that they fulfill our internal requirements and certifications. Aeromar, it's important to say it's, first, it was a very small niche high priced regional airlines and as a result of that, it was really small and the impact in the market is very, very measured. Okay, very small. I think that it's -- there is no impact in any of the larger carriers. And I think something which is really important to say is that this is probably the last carrier that was operating in Mexico with a lot of financial problems for many, many years. And that I will say something which is really important, by no means it reflects a systemic failure of the Mexican civil aviation system.

Thank you, tremendously helpful. Have a good one, guys.

Thank you.

The next question comes from Guilherme Mendes with JPMorgan. Please go ahead.

Good morning, everyone. Thanks for taking my questions. I just have two questions. The first one is a follow-up on the - guidance and the assumptions behind the guidance. So, if you could share the breakdown between domestic and international out of the 10% capacity increase for the year? And Enrique mentioned on the beginning saying that you have flexibility to adjust your capacity according to demand or according to any changes on the FAA discussion, just wondering what's, the blue sky scenario for capacity for the year if things go right? And the second question is related to nearshoring, it's basically how should we think about nearshoring just leading to traffic in the short and longer term? Thank you.

So, regarding the breakdown of the growth rate of 10% for the year, we are seeing slightly higher international growth this year despite being Category 2 in Mexico that is driven by the up-gauge of our U.S./Mexico routes to A321 capacity, but also the already mentioned growth in our Central American seats with the U.S., and international markets.

And we wanted the flexibility on growing that from 10% to 13%, [indiscernible]. It's basically remember that we had six we delivered this year, three of them in the first half, three of them in the second half. We already were really proactively looking at potential delays from Airbus, as we already extended the three aircraft that we already delivered, but the original is that we deliver on the first half, and we have the flexibility for the second half to keep those three aircrafts, we see that CAT1 coming earlier, and also a sub operating case, further delays from the already once, that Airbus has got the files to cover for that challenge that the industry is facing.

Guilherme, this is Enrique Beltranena. I wanted to say that our plan considers CAT1 to be recovered as we said, by the fourth quarter, and we have planned a shift of domestic capacity to fulfill the purpose. But - we see positive progress, we wouldn't expect it to be commercially viable before this time.

That's super clear, thank you and about the nearshoring question?

We believe that nearshoring continues to be macroeconomic trends that we observe in the long-term, which puts Mexico in a very good position economically for the foreseeable future. And we are seeing that effect in our markets which are mostly concentrated in the Northern part of Mexico. We've seen strong volume and strong demand in those markets and we believe that that is partially driven by the nearshoring effect and the higher employment rates we're seeing in the northern part of the country.

Yes, I was in - in Monterrey a couple of weeks ago and then I was in Tijuana also, and it is impressive to see the number of operations and investment of companies, enlargement of warehouse facilities and - and it is important to say, I mean there is, for example in Monterrey, while I was in Monterrey, there's not one single square meter of warehouse available right now and unemployment is down to zero.

That super clear, thanks for taking the questions.

I think it is important -- thank you, Guilherme.

Our next question comes from Filipe Nielsen with Citi. Please go ahead.

Hi guys, good morning, and thank you for taking my questions. So, I have two questions from my side, one thing is, have you learned anything new from starting operating with Santa Lucia Airport instead of Mexico City airports? And the second question would be, to what extent would Allegiant and Viva Airbus alliance have any impact or growth overlap with your routes - organizations? Those are the two from my side? Thank you.

Thank you. This is Holger. I'll quickly comment on the Santa Lucia moves, we started operations in the new airport last March. So, approximately one year ago and sometime this year, routes are still in ramp-up and are on track versus our original estimates. We've seen good load factors. Load factors are healthy and growing steadily. Obviously, this is a completely new airport, so it takes some time for customers to understand how to get there and what it takes to fly from there. We currently have 11 routes operating from Santa Lucia with 19 take-offs per day and I would say the only caveat is that the base fares are still behind Mexico City International Airport levels. And we've intentionally sustained them lower than Mexico City International to continue stimulating demand and make traffic shift from Mexico City to the new airport and as a result, we are currently not planning on adding more capacity from Santa Lucia, we are waiting for the existing routes to mature.

In the relationship - this is Enrique Beltranena. Relationship [with Allegiant] deal, we don't think it's going to affect dramatically our network, because we are a DCP rents and relative's network rather than a relation network.

Great, thank you very much, guys.

[Operator Instructions] Our next question comes from Josh Milberg with Morgan Stanley. Please go ahead.

Hi, everyone. Thank you for the call. My first question relates to your jet fuel guidance for 2023 which I believe you framed in terms of the U.S. Gulf Coast level rather than the economic cost. So, I just wanted to ask, what was the logic for that change, if I understood correctly. And then also what spread you anticipate between the commodity price and the all-in fuel price for this year and eventually what could move that spread up or down? That's the first question.

Thank you, Josh. This is Jaime. We basically use the Gulf Coast because it's basically the easiest way for you to rise - to see which is, the one that is impacting most of - what we do there tinkering. If you want to write-off by a $0.40, it will get you a total economic.

Okay that's great, Jaime. So you're pretty confident in that $0.40 level for this year and don't see much variability around it?

So, the fare makes a lot of also to change. In public and also in change there the game, but we are pretty comfortable. So far, it has been stable over the past six months.

Okay then, perfect. And then, my second question was a follow-up to an earlier question on your CASM ex guidance and I just wanted to see if you could give us a rough idea of what level of aircraft redelivery costs and what level of sale leaseback gains are embedded in your 2023 CASM ex guidance?

I'm just getting the number. Josh, if you have another one, I can take a look at the number or get back - with you later. But it's basically a, fair ASMs, is going to be call it $0.44 impact on redeliveries and sale and leaseback is minimal, $0.01.

Okay. That's very helpful. Really appreciate it.

You're welcome, Josh.

Your next question comes from Rogerio Araujo with Bank of America. Please go ahead.

Hi, gentlemen. Thanks so much for the opportunity. So, in my view, there was the assumption in the guidance that is basically the company capturing the jet fuel price reduction expected for the year. Can you confirm that and if so, can you please provide more details on the competitive environment, how comfortable Volaris is with supply being let's say at a comfortable level this year and also on - a few hedges if there is anything in place at this moment? Thanks very much.

So, I'll take the first question on capacity and competitive environment, this is Holger. As you recall, we grew quickly since the pandemic to build our position in Mexico and we've seen similar moves from the competitors in Mexico. Now we have met those objectives and we will return to a more historic growth rate in the high single-digits, low-teens and that's precisely what you're seeing in 2023. We are planning a 10% ASM growth rate versus '22 and that is much lower and back to the historical growth rates. And that again already considers Airbus delivery delays and engine delays. And so, that is reflected there and we are seeing similar moderation of growth rates by our competitors. So, we believe we are in - we continue to be in a pretty healthy competitive environment.

With respect to the fuel hedging, we don't have any position of hedging for 2023.

Okay. Thanks very much.

Thank you, Rogerio.

Your next question comes from -

So thank you very much for - so, thank you very much to everybody as we depart 2022 and going to 2023. I want to thank you, you, especially you, our family of ambassadors, the Board of Directors, the bankers, the lessors and suppliers for their commitment and support. I look forward to another strong year ahead. And as I said during the Investor's Meeting, I think we are just getting started. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.