Grupo Aeromexico Reports Q3 Revenue of $1.62 Billion, EBIT Margin of 12%

Grupo Aeromexico (NYSE: AERO ) reported third-quarter financial results on Tuesday. The transcript from the company's third-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary Grupo Aeromexico reported a strong third quarter 2026 with a 12% EBIT margin and record revenue of $1.62 billion, a 14% year-over-year increase. Premium revenue and loyalty program participation rose, contributing significantly to the revenue mix, with premium revenue representing 42% of total revenue. The company experienced increased fuel and non-fuel costs but managed to maintain profitability through strong revenue growth and cost-control measures. Forward bookings remain strong, with a constructive outlook for the remainder of 2026, and the company plans to expand its network with new routes launching in 2027.

Grupo Aeromexico's operational efficiency led to recognition as the most on-time airline globally, and the company reports a solid cash position, enabling continued investment without additional debt. Full Transcript OPERATOR Good morning and welcome to Grupo Aeromexico's third quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session at the end with instructions given at that time for the webcast participants.

You may submit questions at any time during the call using the Ask a Question section on the webcast. As a reminder, today's conference is being recorded. I would like to hand the conference over to Ms. Lucero Medina, Head of Investor Relations.

Ms. Medina, you may begin. Lucero Medina (Head of Investor Relations) Good morning everyone. Joining me today to discuss our results are Andres Conesa, Chief Executive Officer, Aaron Luray, Chief Commercial 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 any plans and expectations expressed in this call, including the risk factors disclosed in our SEC filings. During this 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 IFRS measures in the earnings release. Both our call and the earnings release are available on our website.

It is now my great pleasure to turn the call over to Andres Conesa. Andres Conesa (Chief Executive Officer) Thank you, Lucero, and good morning everyone. I appreciate you joining us today to discuss our third quarter 2026 results. We delivered strong third quarter results, reflecting once again the resilience and unique strengths of Grupo Aeromexico's business model.

These results also demonstrate the significant progress we have made in recent years to build a stronger and more flexible company better positioned to navigate periods of uncertainty, including today's high fuel cost environment. I would like to thank the entire Grupo Aeromexico team for their commitment and discipline in executing through a challenging environment. By putting our customers first while maintaining strong cost control, the team continues to protect the quality of our service and capitalize on attractive revenue opportunities. EBIT margin reached a strong 12%, supported by record quarterly revenue that came in above the midpoint of the June guidance range.

In a quarter defined by higher-than-expected and volatile fuel prices, delivering a double-digit EBIT margin is a significant achievement. It demonstrates the strength of our business, our ability to capture premium revenues, and the disciplined execution of our teams. Demand remained healthy, supported by a successful peak season that extended through September and delivered outstanding load factors. We also continue to see strong contributions from our premium products and loyalty program, which enhance our offering and reinforce customer preference for Grupo Aeromexico.

Premium revenue represented 42% of total revenue, up 1 percentage point year over year, while loyalty penetration reached 40%, an 8-point increase versus last year. Total revenue grew 14% year over year, driven by strong ancillary revenue streams including Tatvo and nolocis. Together, these factors, along with revenue management initiatives, supported our performance during the quarter. Capacity increased by around 1% year over year in the first few, and as the temporary negative impact of the World Cup in June and July normalized, we saw a clear improvement in load factors.

August reached 90% and September recorded 87%, which is a very strong level for a shorter season month following the summer peak. More importantly, forward bookings remain strong, supporting a constructive outlook for the remainder of the year. This gives us confidence that underlying demand trends remain solid and that our capacity is well aligned with market conditions. Revenue growth more than offset the year-over-year increase in fuel cost despite jet fuel prices being generally above our guidance.

Fuel costs increased by approximately 170 million year over year in the third quarter, including nearly 93 million above the guidance we shared with you in early July. However, revenue growth was not enough to offset the combined increase in fuel and non-fuel costs. In addition to the higher-than-expected fuel expense, we experienced an anticipated increase in non-fuel costs derived from inflationary pressures and unexpected cost pressures resulting from the appreciation of the Mexican peso. Our teams responded with revenue initiatives, fuel recapture actions, and disciplined capacity deployment, enabling us to deliver a very strong level of profitability in the quarter.

This third quarter also showed early signs of a better cost ex-fuel trajectory. Some pressures, including FX, started to normalize, and our teams continue to manage the cost base with discipline. Looking ahead, as operating leverage builds, costs excluding fuel are expected to continue to improve. This is important because it demonstrates that beyond the temporary impact of fuel, we believe that the underlying business is moving decisively in the right direction, with improving cost momentum and a stronger foundation for sustainable profitability.

As a result of this structural resilience, we ended the quarter with a cash position above the level reported in the third quarter of 2025. Financial debt, including leases, continued on a downward trajectory while we maintain our investment program without raising additional debt. Our focus remains on investing for the future while protecting liquidity and preserving the financial strength of the business. Our network will continue to grow through the recently announced routes launching in 2027, including Mexico City to Milan, Guadalajara to Paris, Nassau, and Montego Bay.

This expansion reflects our confidence in the long-term demand outlook and our disciplined approach to growth, adding capacity selectively in markets where we see attractive opportunities to generate profitable returns. The U.S. Department of Transportation decision immediately revoked its prior order disapproving certain schedules by Mexican carriers marks a very positive development for Grupo Aeromexico. It removes an important restriction on our ability to add frequencies and launch new scheduled services between Mexico City and the United States, subject to applicable regulatory requirements.

This gives us greater flexibility to capture attractive growth opportunities, strengthen our transborder network, and offer our customers more connectivity between Mexico and the United States. Taking care of our customers also means delivering a reliable operation every day in every market we serve. This is something our teams have been focused on, and the results are clear. Cirium once again recognized Grupo Aeromexico as the most on-time airline in the world during the third quarter.

Together with our performance in the first and second quarters, this positions us very strongly to receive this recognition for the third consecutive year, a feat that no other airline has achieved in history. Building on our strong third quarter results and solid outlook, we plan to remain focused on operating reliably, protecting revenue performance, managing costs with discipline, and further strengthening our balance sheet. Ricardo will provide more detail on our fourth quarter and full-year outlook shortly. Before that, I want to highlight the positive opportunities ahead with resilient demand and a favorable fare environment supporting continued revenue momentum.

We also see meaningful operating leverage and better in our existing fleets. At the same time, we anticipate continuing to invest selectively in customer experience and in the network that makes Grupo Aeromexico the preferred choice for travelers. We are confident that this combination of strong execution, disciplined growth, and a resilient business model will continue to differentiate Grupo Aeromexico and create long-term value for our customers, employees, and shareholders. With that, I will turn it over to Aaron to discuss our commercial performance in more detail.

Thank you very much. Andres Castañeda (Chief Customer and Digital Officer & EVP) Thank you, Andres, and good morning, everyone. I want to thank the entire Grupo Aeromexico team for their hard work and dedication, and our customers for their continued loyalty. As Andres mentioned, we delivered the strongest quarterly revenue performance in Grupo Aeromexico's history, with total revenue of 1.62 billion, up 13.6% year over year.

This performance reflects strong demand across the network and the benefits of the commercial initiatives we are executing. International revenue showed strength across all entities, increasing 17.4% year over year, led by long-haul markets and the U.S. region. Growth in the U.S.

region was especially notable given the high comparison base, as last year's third quarter marked the inflection point in U.S. demand recovery. Regarding domestic performance, strength continued throughout the quarter as we distanced ourselves from the World Cup, resulting in domestic revenue growing 6.7% year over year. Turning to commercial initiatives, Aeromexico Rewards continues to be an important driver of customer engagement and revenue quality.

As Andres mentioned, program participation reached a new record in 3Q24, up 8 points year over year and 19 points since the program's reacquisition and rebranding in 2023. Redemption revenue grew 27% year over year, two times more than total revenue growth for the quarter, as investments in the program continue to bring value to customers. Regarding modern airline retailing, our redesigned branded fare structure is driving significant incremental revenue by better aligning our product offering with different customer needs and willingness to pay.

This enables us to more effectively position our premium offering while expanding our ability to compete for more price-sensitive demand. These capabilities continue to support growth in our direct online channel, where in the third quarter direct online share remained at an all-time high of 48%, up 2 points year over year and 23 points versus 2019. These initiatives are giving us greater control over how we present, differentiate, and monetize our products, enabling more disciplined execution of our premium strategy while giving us the flexibility to compete across a broader range of customer segments.

Looking ahead to the fourth quarter, Ricardo will provide details of our guidance, but we continue to see strong demand trends across all geographies. In September, our fall sales campaign generated 45% more revenue than the previous year. In response to rising fuel costs, Grupo Aeromexico remains focused on fuel recapture initiatives and maintaining flexibility in capacity management. Regarding capacity, fourth-quarter growth will be driven primarily by widebodies as Grupo Aeromexico continues expanding its long-haul network in Europe and Asia.

Enabled by recent 787 deliveries, this widebody growth reflects a continued stretching of demand in traditionally weaker periods, particularly in European markets, and includes the extension of Monterrey—Paris to year-round and the annualization of our recently launched Mexico City—Barcelona service. In addition, in the fourth quarter we plan to grow domestic capacity between 3% and 4%, enabled by the increase in Mexico City slots from 44 to 46 per hour. We expect this growth to enhance our leading domestic position at our hub.

In closing, we believe Grupo Aeromexico is well positioned to deliver a strong finish to the year, supported by continued revenue momentum, growing customer engagement, and a disciplined approach to growth. I'll now turn the call over to Ricardo. Ricardo Sanchez Baker (Chief Financial Officer) Thank you, Andres, and good morning, everyone. First, I would like to join Andres and Andres in thanking the entire Grupo Aeromexico team for its outstanding efforts and execution during the quarter.

Our results reflect the team's ability to remain focused, responsive, and disciplined while navigating significant fuel price volatility, foreign exchange movements, and a more demanding-than-expected cost environment. Our results also demonstrate the strength and resilience of our business model and the durable structural advantages we have built over time. In the third quarter, total capacity measured in ASMs increased 1% year over year. Generally in line with our guidance, we managed capacity carefully, prioritizing profitability.

International ASMs grew 3%, while domestic ASMs declined 3%, aligning supply with demand. As Andres mentioned, revenue reached 1.6 billion, up 14% year over year and a record for any quarter. Total revenue increased by 194 million, more than offsetting the 131 million year-over-year increase in fuel price. This strong revenue performance was driven by resilient demand, strength in international markets, targeted revenue management initiatives, and continued growth in our premium products and loyalty programs.

The result was particularly significant given that fuel costs were approximately 93 million above the level contemplated in the guidance provided last quarter. During the third quarter of 2026, Grupo Aeromexico revised loyalty program breakage, the first such alignment since 2018. This reflects current member activity and long-term program trends. This update resulted in the recognition of $0.9 million in revenue for the period, together with an adjustment to our deferred liability.

More importantly, this objective breakage establishes the baseline that we expect to drive sustained growth in our annual royalty revenue moving forward, while revenue growth fully offset by year-on-year increase in fuel prices, the combined impact of higher fuel costs, anticipated increases in other operating costs, and the impact of the stronger Mexican peso continued to pressure profitability. Despite these broader cost pressures, our disciplined execution and strong revenue performance supported a net income margin that remains among the strongest in the industry.

Total operating expenses increased 22% year over year, driven by a 58% increase in fuel expenses as fuel prices averaged nearly $4 per gallon compared with $2.50 in the third quarter of 2025. Our efficiency helped mitigate these impacts, with fuel consumption down 2%. Excluding fuel, operating expenses increased 10%, primarily reflecting the stronger Mexican peso, inflationary pressures, and costs associated with growth. Unit cost ex-fuel increased 7% year over year, an improvement over the approximately 15% increase recorded during the first half of the year.

This progress reflects continued cost discipline, operating efficiencies, and a more stable foreign exchange environment. As we continue to capture operating leverage opportunities by generating more ASMs with our existing assets, we expect our capital next year to turn more favorably. Adjusted EBITDA amounted to 389 million, representing a strong 24% margin, while operating income reached 190 million, resulting in a robust 12% operating margin. The strength of our financial results underscores the structural durability of our business model and our ability to preserve healthy profitability despite a challenging cost environment.

In our view, however, the most important financial result of the first nine months of the year has been our strong cash flow generation. Grupo Aeromexico generated $542 million in net cash from operating activity through September 30, 2026, enabling us to fund our planned investments while continuing to reduce financial debt. During the third quarter, we repaid an additional $7 million of debt, further strengthening our balance sheet. Despite elevated jet prices and other cost pressures, we ended the period with $965 million in cash and cash equivalents, up $31 million year over year.

We also renewed and upsized our revolving credit facility from $200 million to $250 million, bringing total liquidity to $1.2 billion, equivalent to 21% of last 12 months' revenue.