Grupo Aeromexico, S.A.B. de C.V. (BMV:AERO) Q2 2026 Earnings Call

0:00 Good morning, and welcome to Aeromexico's Second Quarter twenty twenty six 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'd like to turn the call over to Ms. Lucero Medina, Head of Investor Relations.

0:30 Good morning, everyone. Joining me today to discuss our results are Andres Cornetta, Chief Executive Officer and Ricardo Sanchez 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.

1:24 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 earnings release.

1:39 Both our call and the earnings release are available on our website. Now, it is my great pleasure to turn the call over to Andres Cones. Thank you, Lucero, and good morning, everyone. We appreciate you joining us today to discuss our second quarter twenty twenty 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 resulting in achieving financial results for the second Q, generally in line with the guidance we provided last April.

2:24 Revenue performance was strong with TRASC growing 10.5% year on year during the quarter, a period that also saw the two best sales weeks in our company's history. We kept the 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.

3:10 Despite this temporary change in momentum, our disciplined commercial and operational execution enable 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 allow us to avoid some unprofitable flying. Capacity increased 2% year over year during the second quarter, in line with our guidance.

3:55 Most adjustments were concentrated in the domestic market, while 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.

4:44 This performance reflects the continued 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 fair increases driven by higher fuel costs, our customers did not trade down within the fair class structure, underscoring the resilience of demand for our premium offering. As of the end of June, we let all global full service carriers in on time performance according to Silvium, positioning us in a good spot to achieve the recognition of world's best on time airline for the third consecutive year, a feat that no other airline has attained.

5:34 We are also very proud of the opening of our new best in class lounges and checking facilities in Mexico City. We want to recognize AICM authorities for the investments they have made to significantly improve our comfort facilities. Also in this quarter, we proudly launched our new Aeromexico in Bursa, 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

6:16 in the program. This is 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 EUR 30,000,000 higher than the already high forecast we cut at the beginning of the second quarter. Adjusted for this additional impact, EBIT margins would have been at the top of the guidance range.

7:07 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 sorry, 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 4Q, supported by additional wide body flying, the recent delivery of 2.787 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 winter Ayatas season.

8:18 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 long haul 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 twenty twenty six 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.

9:13 With that, I will turn it over to Ricardo to discuss our financial performance in more detail. Thank you. Thank you, Andres, and good morning, everyone. I would like to echo Andres' comments and congratulate the entire Aeromexico team on their outstanding performance in a very challenging environment. Delivering operational profitability despite peak 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.

10:08 Total revenue reached approximately EUR 1,500,000,000 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 PRASM 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.

10:54 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 EUR $220,000,000 compared with 2025. This translated into roughly EUR 30,000,000 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 76. 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.

11:45 Adjusted EBITDA totaled EUR260 million in the second quarter, representing a margin of 18%, while operating income reached EUR68 million, resulting in an operating margin of 5%.

11:58 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 evolved 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 EUR 1,000,000,000 in cash and total liquidity above EUR 1,200,000,000, including our fully undrawn EUR 200,000,000 revolving credit

12:29 facility. This robust liquidity position reflects our ability to navigate a challenging environment while maintaining a strong cash flow generation and avoiding incremental debts. We generated approximately EUR $362,000,000 in operating cash flow, reduced financial debt by approximately EUR 17,000,000 and closed the second quarter with adjusted net debt below the balance recorded on 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. Turning into the second half of the year, we are entering the peak summer travel season from a position of strength. Demand trends remain healthy, supported by solid booking activity across both our domestic and international networks.

13:17 In addition, the fuel price curve, also volatile, has moderated from the elevated levels experienced during April and May, providing a more favorable cost backdrop.

13:27 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.

13:52 For the third quarter, we expect revenue between EUR 1,590,000,000 and EUR 1,620,000,000 and 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 plant capacity growth through 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 authorities' approval to increase hourly operations from 44% to 46% beginning with the next IATA season. For the fourth quarter of twenty twenty six, we expect total revenue growth of 14.5% to 16.5% and adjusted EBITA margin of 28% to 31% and an operating margin of 15.5% to 18.5%.

14:46 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 and 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. Thank you very much. Thank you. Our first question comes from Duane Pfennigwerth with Evercore ISI. Your line is open.

15:47 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?

16:05 And then can you speak to what level of recovery you're seeing here in July and into 3Q? Any metrics you can put around June that would really isolate it to the World Cup impact? Hi, Duane. Good morning. Impact of the World Cup on domestic revenue, we estimated for June to be around $24,000,000 So that's the revenue loss for the month. Despite this, as we mentioned in our initial remarks, we have record revenues in June. We have our best June in history and our best second quarter in terms of revenues in history. This number does not include we have positive effects on charters, for example, as I mentioned that we

16:55 transported several teams during the World Cup. So overall, I would say that it was slightly negative, the impact of the World Cup on our revenues in June. And we've 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

17:25 for August and September. So we believe it was strictly temporary effect and we are back to where we were in April and May. We can follow-up 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's 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. 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, April. Domestic was slower. So April and May didn't reflect

18:31 the impact of higher jet fuel. In June, we saw better levels of pricing. And going forward, we see international demand very, very strong with no change. And again, that was not affected during the World Cup. And basically, domestic traffic is expected to recover both once the World Cup is behind us and also because yields were not consistent with the level of jet fuel prices during the start of the second Q. So this is, again, the story. But going forward, again, as

19:04 we stressed in the initial remarks, we are projecting very strong revenue numbers for the third Q and fourth Q. And The reason behind it is as when the conflict started, we had most of our second Q seats sold and we had availability for the second half. So we have been able to fill the second half seats available with yields that are consistent with, again, the jet fuel prices that we saw after the conflict. So we are in

19:34 very good shape for the second half. Of course, we have significant numbers of seats to sell. We are not fully booked for the second half. But the demand environment has continued to hold up despite the recent decrease in the price of oil. Again, that was last week. Today, it's as you know, it's up again this week. So we are monitoring that very closely, but we feel very confident that we will be able to achieve these targets that we put forward in the guidance.

20:07 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 now and using the operating leverage. So we expect to produce additional revenue with the same assets that we have and this will improve also profitability. So we think this is also an important advantage for the last part of the year and that advantage will also help in 2027.

20:43 Thank you. Thank you. Our next question comes from Michael Linenberg with Deutsche Bank. Your line is open. Yes. Hey, good morning everyone. 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? Is it I'm just trying to get a sense of the increase. Yes, correct, Mike. Hi, how are you? Yes, 44 to 46, we're starting the next IATA season, correct. That means around 10 pair of slots additional to what we have today.

21:32 Our share of this increase from 44 to 46, which as Ricardo mentioned, we plan to increase

21:40 ASKs high single digits for the 4Q. We will use these slots for the additional wide body flying that we mentioned plus to recover some capacity we reduced in the domestic market. The plan for these slots. Okay. So wait, so your slots are going from 44 to 46. So you're going to get two per hour. What's the airport

22:04 going? Or is the airport? Yeah. The capacity in the airport is going to increase from 44 to 46 per hour. Our share of that during the day is 10 pair of slots. So as we see our proportion of slots, this will mean 10 additional pair of slots for the winter season.

22:27 Okay. Okay. That's helpful. And then just another question. This is more on just the accounting. Know in your other revenue, it looked like that there was a bit of a bump up there. Is that was that a one time or an out of period type gain or what drove that? 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's showing up in that number. Thanks for taking my question.

22:59 Hi, Mike. Well, yes, this line item reflects I think the success that we are having in diversifying our revenue. So here we have revenue associated to Aeromexico Rewards, the fact that we have been growing penetration translates into higher revenue here. We have also revenue associated to VIP lounges. We reopened our VIP lounges during the second quarter of the year. We have been remodeling them for last year. So we didn't have those revenues last year. We also have in that line the revenue associated to the charter operations that we performed during the World Cup, where we transported several national teams within Mexico and also from Mexico to The U. S.

23:44 And Canada. So that is reflected there. And the line item also captures all the initiatives that our commercial team is doing on the retailing airline retailing initiatives, including car rental, insurance and vacation packages. So it's a combination of all these factors that is into the deck, including also the launch of the new credit card. Okay, great. Okay. Thank you.

24:17 Thanks. Thank you. Our next question comes from Felipe Nielsen with Citi. Your line is open. Hey, hello everyone. Thanks for taking my question. So just two points here. I would like to understand a little bit more about the impact potential impact from fleet utilization in your ex fuel costs.

24:46 If you could maybe give us a sense about how is this evolving or improving as you increase capacity into the second half? And how should how is the level of impact in your guided margins for the period? And my second point, wanted to remind if you could remind us how is the fuel recapture? You mentioned higher than expected recapture in second quarter. Just if you could maybe remind us the number in second quarter and explain a little bit about the recapture in third quarter and fourth quarter. Thank you.

25:34 Okay. Let me take the first part. Philippe, good morning. Can you help us with your question again, the first question you have? So for the second one of fuel recaptured, we guided the market back in April that we were projecting to recapture 50% of the pressure. We ended up with 7575%. For the second half, in the implicit guidance that we gave, we are projecting to recover more than the impact that we had and that was the plan because it was again,

26:06 because you have already seats sold for the second Q. It was impossible to recover everything in the second Q. So we expect to offset some of this 25% of the 25% that we didn't recover in the second Q, that was the impact versus last year on the second half with the guidance that we gave on revenue. So it will be more than 100%. Still, we in the projections that we show, EBITDAR and EBIT, they are in very good they stand in growth year over year of 911%, third and 4Q. But still, if you look at the total 2026 versus 2025, we will be slightly below 2025.

26:53 Again, very good numbers. But again, that reflects the huge impact that fuel cap on the industry. Can you please help us or we will repeat the first question? Yes. So just wanted to understand on your ex fuel costs implied in your guidance, does fleet utilization like the lower fleet utilization plays out in the whole equation? So you're expanding capacity into the fourth quarter. Have like maybe lower utilization now. So how this should evolve and impact your ex fuel costs implied in your guidance?

27:48 Yes. Thank you, Philippe. This is Ricardo. Yes, as we mentioned, we have these operating leverage advantages or opportunities. Our P and L already reflects the ownership cost of these aircraft that we are not really flying as intensively as we could. So as we fly them more, ownership costs are the same, but we are producing additional revenue. Also, are making additional use of our crews. We are not really necessarily hiring for the 4Q. We would be hiring for growth in 2027, but not necessarily for 4Q. So we have also advantages on that. So in terms of the fixed cost structure, as we fly more this aircraft and we produce revenue associated with them, have these high margin growth opportunities that we see for the fourth quarter and for 2027.

28:38 No. And to complement what Ricardo just mentioned, this operational leverage is very significant. It will not only allow us again to improve margins on the 4Q, but we are looking at it's more than enough probably to cover our growth needs, which we are obviously preparing and we'll release later in the year for 2027 and even beyond for 2028. So we stand in a very solid position with the assets needed to fund growth for the next several quarters.

29:14 Great. Thank you. Thank you. Our next question comes from Julia Orsi with JPMorgan. Your line is open. Yes. Hello, everyone. Good morning. Thanks for taking the time. 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?

29:42 Hi, Julia. As a competitive domestic market, we've seen some rationalization of capacity in the second Q. As I mentioned before, yields in the domestic market did not reflect the fuel environment for the start of the second Q. Again, in June, we started to see some better yield support in the domestic market. And going forward, the competitive landscape, again, will depend on the transaction that was that has been asked to be approved by the competitive authorities. We will not know where that stands. But again, our job is to continue strengthening our product and deliver the best competitive proposition from our clients, and we are in very good shape on that front.

30:42 Got it. Thank you. And can you comment a bit on the, let's say, demand elasticity across the segments? Just trying to understand if you believe that there is still room for further price increases if we continue to see volatility on the jet fuel curve in the coming months? Yes. Can you please repeat? Sorry, we didn't lost you a little bit. Yes, of course. Can you comment a bit on how you're seeing demand elasticity across the segments? We are just trying to understand if you believe that there is still room for further price increases if we continue to see the jet fuel curve subject to volatility as it has been as it has been the case over the past couple of days. Thank you.

31:36 Well, as I've mentioned before, the Manacross segments, we're seeing very good support for the second half of this year. International demand continues to be strong. We are seeing very solid bookings to Europe. We have we've increased our capacity to Europe for the summer. As I mentioned also, with the additional shares that we will receive for the 787s, we are again providing daily service to Seoul. And also we are keeping our Monterrey Palace flight all year long. Those are important developments of our Zalona Mexico flight. It's doing very well. The U. A. Flying has been also very, very solid, same to Central And South America. So very solid demand across the board. And for Mexico, again, as I mentioned, softness was felt in the leisure and corporate market.

32:30 For June, but we are seeing very positive developments for the rest of the summer and also for the 4Q. We showed that we are flexible, that we proactively engage. So our plan is to expand our capacity, particularly in the 4Q. But if fuel prices continue to be volatile and we do not see that demand is there, we will not hesitate and reduce capacity again. The only thing being rest assured that it's fully protected is our slots in Mexico City. We will cover all of our slots. We were able to reduce capacity in the domestic market because we had a waiver because of the higher jet fuel prices during the second Q. That waiver ends for winter ayatta.

33:17 If the waiver is not there, we will fully cover those slots. If oil prices remain high and the waiver is still there, we will obviously adjust and reduce capacity. Got it. Thank you. Thank you. Our next question comes from Jen Spice with Morgan Stanley. Your line is open. Hi, hello. Yes, thanks for taking the questions. One on the co branding partner change, I know that all the loyalty members will keep their loyalty membership, but I was just wondering, will take some time for those customers to switch to the new like credit card.

34:05 So like just to understand what are the implications for your financials going forward in order to correctly model this? And secondly, I want to double click on the prior question on the competitive environment domestically. I mean, there's like a very divergent capacity adjustments from your two domestic competitors. One is increasing capacity in the third quarter, the other one is reducing it. So would you say there's still you're seeing like discipline in the market? Yes, like what's your view there? Thank you. Hi, Jens. Good morning. On the co branded credit card, I mean, we successfully launched the new credit card within Bursa. It's going according to plan. We are seeing very positive trends.

34:57 In we obviously fully prepared for the bridge as we move from the other credit cards that we have to Ingvursa. So our financials are covered on that sense and the guidance that we provided, again, reflects any this transition between the two cards. One very encouraging sign that we are seeing with the InbusaCard is that half of the cardholders that have received the card today previously did not have a co branded credit card. So that's new and that's the idea that we are looking for is not only to obviously keep the customers that we have before, but also to bring new customers on board And we are seeing that. And on top of that, let me remind you that we are also working on the new contract with American Express that is due in the 4Q of this year.

35:47 Then on competitive environment, I think my view is that these differences in capacity between the two ULCCs have to do between the different stages where they have the impact of the engine problems in their planes. One of them had them before, so they reduced capacity. The other one probably received the NEOs later and then that's why it's reducing capacity later. And on top of that, obviously, you have the impact of jet fuel, which calls again to rationalize capacity independent of the engine issue. But obviously, we cannot answer that for them. But again, we are fully ready to compete regardless of the outcome in a competitive environment in Mexico.

36:36 Perfect. Thank you. It seems that the higher jet fuel, all else equal, seems to be like a more benign environment for you guys than for your competitors. But as oil comes down, will you because according to your guidance, you will be very close to reaching like pre war profitability in the fourth quarter. Like going into 2027, if and hopefully jet fuel normalizes further, will you be like keeping prices at an elevated level to capture even higher margins like because we're hearing that from The U. S. Carriers, right? Just understanding your strategy there. And also if you could give a bit of context on the ASA negotiation, how is this going? And if you expect to reach a deal there soon? Thank you.

37:29 Yes. On the first part, we are seeing very again, solid demand consistent with the level of yields today that are again reflect higher the jet fuel prices that we saw after the conflict. So we are very, very positive and confident that we will be able not to reach the guidance that we have with information that we have today. If oil prices go down, obviously, that will put pressure across the industry to bring prices down. It's too soon to say what will happen in 2027, but we have three world record profitability levels with lower oil prices back then and obviously lower yields than what we have today.

38:21 We are ready to react and we have these other drivers and tailwinds for growth in margins, particularly the operational leverage that I mentioned that will be there fully for 2027. So again, too soon to say, probably as the year moves along, we will provide the guidance for the rest of the year and for 2027. Then on the negotiations with the flight attendants, they've approved in the they have how it works in Mexico, they have like an assembly.

39:08 It was approved, then you need every individual to vote in favor of any agreement and the date the deadline for that is the last day of July, July 30. We are working constructively with the union team and we're confident that we will have a firm agreement before the end of this month. Perfect. Okay. Appreciate the additional color. Thank you, guys. Thank you. That's all the phone questions that we have for now. Hi. We have a couple of questions from the webcast. One is related to costs and if we can explain some of the cost variations and what is driving costs besides fuel.

40:02 But as we mentioned, are reflecting the as a main driver, the exchange rate appreciation, the strong peso. So this is driving several of the cost items. The peso appreciated 11% versus last year. There are some line items that have other particularities, for example, maintenance costs. This year in maintenance, we are having a higher maintenance cost versus last year, part of it reflecting the additional fleet that we received last year. We received close to 25 aircraft. Another important element impacting maintenance cost this year is related to the power by our agreement of our components maintenance programs. So we have three contracts, one for our Embraer fleet, one for our seven thirty seven fleet and one for the seven eighty seven fleet. And the three of them came up for renewal this year. So this year, we had like an adjustment not coming from the renewal and going forward for the next five to seven years, the power by our agreements will move in line with certain cost indexes. So we have this particular renewal impact on our maintenance effects this year.

41:13 I think that's the main variation on the cost items. We have also other question related to cash flow and CapEx. Cash flow generation this year has been very strong. In fact, net cash flow from operating activities in the first six months of the year has been even higher than in 2025 despite having around EUR $250,000,000 of impact, no additional fuel cost expenses in the first six months of the year. Going forward, for the rest of the year, we continue to expect a strong net cash flow from operating activities. So having net cash flow below EUR 1,000,000,000 between EUR 801,000,000,000. And with that and our CapEx program, what we think is that we will have a free cash flow of around close to 100,000,000 this year. Now going into 2027, if the fuel curve prices are materialized and also considering the operating leverage opportunities that we have, what we would anticipate is that net cash flow from operating activities can grow materially next year, perhaps more than 30% if these things materialize, which will translate directly into additional free cash flow given that CapEx programs for this year and for next year are practically similar around the $450,000,000 range of CapEx. Of this $450,000,000

42:45 it's around 300,000,000 of maintenance CapEx and around EUR 150,000,000 in other projects. Well, thank you for joining this call. We look forward for being here again after the summer as we provide in our next quarterly call. So 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.