Grupo Aeromexico SAB de CV (AERO) 2014 Q4 法說會逐字稿

Good morning and welcome to Grupo Aeromexico's Fourth Quarter 2014 Earnings Conference Call. Before proceeding, I would like to mention that certain comments made during the conference call may constitute forward-looking statements regarding future events or the future financial performance of the Company. These statements are based on the current beliefs and expectations of management and the Company regarding future events or future financial performance.

Forward-looking statements are based on management's current assumptions and on the information currently available and do not guarantee the Company's performance. The timing of certain events and actual results may differ materially from those projected by forward-looking statements due to a number of factors, including but not limited to, both inherent to our industry, as well as commercial, economic or other risks and uncertainties.

At this time, all participants are in a listen-only mode. I would like to now turn the conference over to Mr. Andres Conesa, Aeromexico's Chief Executive Officer.

Thank you, Paula. Good morning everyone and thanks for joining also in our fourth quarter 2014 results conference call. With me today is, Ricardo Sanchez Baker, our CFO and Jonathan Wallden, Senior Vice President of Financial Planning and Investor Relations, who I would like to take the opportunity to introduce, as he recently joined Aeromexico. Jonathan has more than 19 years of experience in different finance management roles at British Airways and Qatar Airways. And with the addition of Jonathan, we will continue to strengthen our management team and we are looking forward to adding his extensive airline experience to the Aeromexico team. Welcome Jonathan.

So, let me begin by highlighting results for the quarter. As we've mentioned in previous calls, 2014 was characterized by a challenging economic environment in Mexico and by significant capacity expansion within the Mexican airline industry, mainly during the first half of the year. But we began to see signs of improvement in the fourth quarter. Let me share some specific examples.

Starting with the Mexican economy, The IGAE, which is a proxy for GDP growth, reported year-on-year growth of 2.6% during the period of September to November of last year. This compares positively to the 1.1% year-on-year increase in the same period of 2013 and the 1.8% year-on-year increase registered during the first six months of last year. Therefore, while last year economic growth was below our initial expectations, we expect a slight improvement in the economic environment for 2015.

In recent months, we have also observed more rationale capacity expansion of seats in the industry, especially in the domestic market. In spite of a more dynamic economic environment, total passenger traffic growth has moderated to a 6.9% rate during the October to December period, as compared to 8% growth during the first [eight] months of the year, partially reflecting lower growth in capacity and a more stable yield environment.

During the quarter, we experienced some tailwinds, thanks to lower fuel costs, which were 10.5% lower than the same period of last year. These were partially compensated by the 6.7% depreciation of the Mexican peso. It is important to note that last year is the first one in which international passenger revenues have exceed domestic passenger revenues, thus contributing to our (inaudible) natural hedge in our P&L.

During the fourth quarter, we achieved record revenues of MXN11.6 billion and last quarter represented the 19th consecutive quarter of positive operating profit, with a 210 basis point margin improvement. Ricardo will later comment on our financial results in more detail, but this is an achievement that I wanted to take a moment to highlight.

Now, I like to briefly discuss the main factors that influenced our fourth quarter results, as we continue to moderate Aeromexico's ASKs growth. First, fourth quarter domestic passenger revenue per ASK increased 6.5%, thanks to higher demand in the context of more rationalized capacity. Capacity measured in ASKs recorded a slight decrease of 1% in the domestic market in 4Q of last year. From an international perspective, ASKs increased 9%, as we continued to strengthen our product offering and expand our network.

Over the past 18 months, we have incorporated seven new Dreamliner 787-800 aircraft, with our sixth and seventh entering service across our network in the last few weeks. I am pleased to announce that this new aircraft will also be the first to offer onboard WiFi. International market capacity growth during the fourth quarter was primarily due to the addition of seats that these larger aircrafts provide. And as expected, this increase in capacity generated some short-term pressures on yields. But, as previously discussed, yield has been gradually improving, as this additional capacity is absorbed and our new product becomes more widely known by the market. We expect this trend to continue in 2015.

Overall, we have continued to execute our revenue management strategy, focused on optimizing revenue per ASK. We have seen important sequential improvements in unit revenues, achieving our 3.1% increase in revenue per ASK and a 4.1% increase in passenger revenue per ASK.

I'd now like to briefly update you on Aeromexico's network expansion during last quarter and plans for the forthcoming year. One of the key elements of our strategy is to consolidate Aeromexico's presence in Central America, and to improve our service offering in Latin America. In December, we expanded our service offering with flights connecting Mexico City to Managua six times per week. We will also start service between Mexico City and Medellin in Colombia, with a total of four-weekly flights effective March 2015 and this flight will become daily, two months after, in the summer of this year.

Additionally, in May of this year, we will be offering daily flights between Mexico City and Panama. This increases our network to a total of 16 destinations in South America, which will then enhance connectivity to Aeromexico's domestic and international networks.

We also continue strengthening our service into the US and Canada. In Canada, we are adding our second destination from Mexico City, which will be Toronto, effective May of this year with a daily flight. And in June, we will be launching our New Mexico City to Boston service with six flights per week. We are also increasing frequencies to London, Heathrow Airport. Today we [are] three per week, we are moving to four in April and we will be servicing five weekly flights in June of this year. Since 2014, this route has been served entirely with our 787s.

With regard to our hubs, in December we began operating our daily Monterrey-New York flights and by the end of March, we will start our daily Monterrey-Miami flight, further strengthening our presence and connectivity to Monterrey, which is our second main hub. Miami will be our ninth international destination from Monterrey, resulting in a total of 25 domestic and international destinations served from this city. In parallel, we will continue to strengthen our position at our main hub in Mexico City through the use of efficient and bigger aircraft.

I'm proud to point out that during the past few years, Aeromexico has been able to add more international capacity than any other airline in Mexico, offering more than 600 daily flights, connecting our network of [our 80] destinations in 20 countries throughout Europe, Asia and the Americas. These network-related strategies have resulted in an increase in the connectivity of passengers in the network from 26% connecting in 2013 to around 30% in 2014.

Now, let me mention in more detail regarding the modifications of the bilateral agreements between the US and Mexico. Subject to approval by the Mexican Senate, this amendment will allow Mexican and US airlines to fly freely between the two countries, without any of the limitations which exist today. These combined with the possibility of obtaining antitrust immunity, will pave the way for a closer cooperation between Aeromexico and our US strategic partner, Delta, allowing us to align network and schedule, simultaneously providing an enhanced customer proposition with increased frequencies and network offering.

Finally, I would like to update you on the Mexico City Airport -- on the New Mexico City Airport announced last quarter. The new airport will be built over the next four to six years in several stages, with two mix modes; that means simultaneous landing and takeoff runways, operating during the first stage. We continue to work very closely with the Mexican authorities to ensure that we take full advantage of this once in a lifetime opportunity to create a world-class hub for our domestic and international passengers, optimizing value, not just for Aeromexico, but for the broader Mexican economy. The new airport offers opportunity for Mexico City Airport to become the natural hub for passengers transferring between North and South America and beyond. We very much look forward to continue our collaboration with the authorities on this project. In the meantime, we will continue to work with the relevant Mexican authorities to further improve the existing airport, delivering an enhanced customer proposition on the ground, as well as in the air.

Capacity control remains a priority for 2015 and we will continue to manage our growth in a disciplined way, despite the fuel price increases. As we have commented in the past, for this year, we expect a lower ASK growth rate than last year. Aeromexico's capacity growth results from [up-gauging] our existing fleet and operating new aircraft with lower unit operating costs. We expect total capacity to increase between 8.5% and 10.5%, with a higher growth rate in international market of 11% to 13%, due mainly to the replacement of the 767s with our new 787s, which have close to 30% more seats. In the domestic market, growth will come from aircraft up-gauging, which will be in the conservative range of 4% to 6%.

Turning to our cost base, we remain fully committed to containing costs. We have a strong pipeline of cost reduction initiatives that will continue to improve efficiency. While the financial community has been concerned that lower fuel prices might lead to significant capacity growth, I'd like to reinforce the message that this is not Aeromexico's plan, as we believe that growth due to volatile fuel prices can only lead to industry deterioration in the medium term. With our cost initiatives in place, we will continue to drive savings to the bottom line with strong revenue growth and yield preservation, regardless of fuel prices. We are committed to continue driving quality revenue and improving Aeromexico's performance this year.

Finally, we will continue to invest selectively where we believe we can deliver the greatest returns, with e-commerce being a particular focus for this year. By offering improved customer choice, we will expand opportunities to drive additional ancillary revenues and improve our cost per ASK. We expect to see that momentum build through 2015 to further strengthen Aeromexico's position as Mexico's premium carrier.

Before handing the call to Ricardo, let me underscore the fact that we will continue to take the necessary steps to drive profitable growth, while creating value. Our outstanding team and successful strategies in place ensures that we will continue to do so. Thank you very much for your confidence, and please Ricardo, go ahead.

Thank you, Andres, and thank you all for joining us on today's call. Let me begin by discussing some of this quarter's financial highlights. Beginning with our topline, we achieved record revenues of MXN11.6 billion in the fourth quarter of 2014, an 8.3% year-on-year increase, 8.3%. This increase was mainly due to a 9.8% increase in passenger revenues, as well as a 24.1% and 11.4% rise in cargo and excess baggage revenues respectively. This was partially offset by a 37.4% fall in other ancillary revenues, as a result of increased revenues -- ticket revenues related to changes in passenger consumption patterns during the fourth quarter of 2013 and a 34.3% decrease in charter revenues, mainly due to the replacement of charter with scheduled operations. This is the fifth consecutive quarter in which we have had a year-on-year increase in cargo revenues. This was driven by improvements in our commercial strategy and customer service, as well as the 787's extra cargo capacity.

With regard to ancillary revenue, as Andres said, we believe there are substantial opportunities as we enhance the customer offering, including our Aeromexico Plus] service upgrades, prepayment for excess baggage, flight change functionality and insurance among others. These combined with the lower selling cost associated with distribution channels -- online distribution channels.

Due to our disciplined approach to capacity and a more favorable pricing environment, average yield increased by 4.3% year-on-year in the fourth quarter of 2014, representing the first year-on-year increase in this indicator since the fourth quarter of 2012. Total quarterly revenue per ASK and passenger revenue per ASK increased 3% and 4.1% respectively year-on-year. This represents the first quarter with RASK improvements since the third quarter of 2012.

On the expense side, two macroeconomic factors impacted our cost structure this quarter. To begin, fuel prices fell significantly in the final months of 2014, resulting in a 10.5% reduction in our total fuel cost for the quarter. We are well positioned to capture benefits of market fuel price reductions, thanks to our hedging strategy, with 50% of next year's fuel requirement hedge, using a mix of call and call spread options. This allows us to immediately benefit from the decrease in fuel prices, keeping any mark-to-market loss, capture the value of the premiums paid for such options. The benefit we obtain with lower fuel prices is not fully proportional to the reduction in international market fuel prices, because the Mexican peso depreciated 6.7% against the US dollar during the fourth quarter. And in addition, there is a time lag in updating fuel prices in certain markets to which we operate. These two factors partially offset the cost reduction.

During the quarter, effective fuel price per liter decreased 13.9% compared to the fourth quarter of 2013. Secondly, Mexican peso depreciation against the US dollar, I mentioned before, increased some operating cost, such as aircraft leases, maintenance expenses, air communication and traffic expenses among others. We estimate that during the fourth quarter of 2014, the 6.7% average exchange rate depreciation contributed to a year-on-year increase of approximately [MXN270 million] in operating costs, excluding fuel.

It is important also to note that we have been concentrating in managing our capacity. Fourth quarter ASKs increased 5.1%, well below the 12.4% increase that we reported last quarter. This capacity discipline, also important in terms of matching market demand and improving profitability, limited our ability to improve our unit costs during the quarter. Consequently, our fourth quarter total cost per ASK, expressed in dollars, decreased by 5.7% year-on-year, while our CASK in dollars, excluding fuel, increased by 1.8%. For the full-year 2014, our total cost per ASK in dollars decreased by [4.5%], but our CASK in dollars, excluding fuel, decreased by 3.4%.

I would like to highlight the fact that this is the third consecutive quarter in which our international passenger revenues are higher than our domestic passenger revenues, building a natural hedge against exchange rate fluctuation. As a result, Mexican peso depreciation during the quarter of 2014 was broadly neutral on our EBIT line.

Moving on to our bottom line, fourth quarter operating profit reached MXN925 million, a 46% year-on-year increase with an 8% margin, 2.1 percentage points greater than the same period of last year. As Andres mentioned, this represents 19 consecutive quarters with positive EBIT results. Our PLM subsidiary remitted MXN52.8 million to Grupo Aeromexico in capital stock reimbursements during the quarter, to reach our total remittance of MXN193.4 million for the full year of 2014. Fourth quarter adjusted EBITDAR was just short of MXN2.7 billion, a 28.1% improvement compared to the same period of 2013. The adjusted EBITDAR metric provides more detail on Grupo Aeromexico's capacity to generate cash, as it includes recurring dividends or capital stock reimbursements from subsidiaries accounted under the equity method.

During the quarter, Grupo Aeromexico registered a positive foreign exchange impact of MXN800 million due to exchange rate depreciation. This is due to the Company using US dollar as its functional currency, while the Mexican peso is used for registration and reporting. Grupo Aeromexico's total tax liability for the fourth quarter of 2014 was MXN449 million, mostly due to the impact of deferred taxes, resulting from the revaluation of non-monetary assets denominated in foreign currency, due to the US dollar appreciation. It is important to note, however, that this amount does not represent the cash outflow for Aeromexico.

Fourth quarter net income reached MXN761 million, with a 6.6% margin, a 3 percentage points improvement compared to the fourth quarter of 2013.

As for the balance sheet, our financial net debt, including leases, the adjusted EBITDA ratio was five times. We estimate that Mexican peso depreciation had a negative impact of almost MXN2.2 billion on our adjusted financial debt, raising our financial net debt ratio to adjusted EBITDA average. Adjusting for this impact, our financial net debt to adjusted EBITDA ratio would have been 4.7 times.

During 2014, cash flow generation remained strong. Net generation of cash resources derived from operating activities amounted to MXN2.9 billion, resulting from operating cash generation of MXN3.4 billion and a negative working capital [fluctuation] of MXN0.5 billion. These negative fluctuations on working capital reflect mainly a reduction of MXN0.4 billion in (technical difficulty) compared to the end of December 2013, due to the Company's view of maintaining a conservative advanced sales profile to support the strengthening tariff [in miles].

For the full 2014, net cash flow from investing activities amounted to MXN3.4 billion, mainly associated with our fleet renewal program. Through prudent cash management, our cash balances remained at (technical difficulty), an equivalent amount to that recorded at the end of 2013.

Moving on to 2015, our base operating fleet plan for this year takes into consideration the following adjustments. First, we expect to deliver 16 aircraft; four 767s, five 737-700s and seven Embraer 145s. On the other side, we expect to incorporate 15 aircraft into our fleet; three 787-8s, six 737-800s, five Embraer 170s and one Embraer 190. We therefore expect to end the year with 123 aircraft, one aircraft less than the 124 that we had in 2014. This plan, as Andres mentioned, implies a growth in between 8.5% and 10% growth in terms of ASKs, with a growth rate of 11% to 13% in the International segment and just 4% to 6% in the domestic market.

Specifically, we expect to reduce our (technical difficulty) fleet operating from Mexico City, replacing them with Embraer 170 aircraft, which will allow us to improve our product offering at this aircraft. It is important to emphasize that Aeromexico has significant opportunities to continue to grow at Mexico City Airport through continued up-gauging. We currently operate approximately 78% of our flights from this airport with our regional fleet and 737-700s, which provides us with significant growth flexibility across the medium term.

In terms of our wide-body fleet, we expect to deliver our remaining 767 aircraft and substitute them with 787-8 aircraft across this year. This will allow us to achieve cost efficiencies and improve in-flight experience for our passengers.

With this, I conclude my remarks. Thank you once again for joining our call today and we would now like to answer any questions that you may have. Thank you.

(Operator Instructions) Benjamin Theurer, Barclays.

First of all, congratulations on the strong results on the back of -- on the end of 2014. That's really encouraging. I've just one question in regards of fuel outlook 2015. So clearly we've seen the benefits yet falling through already in the fourth quarter, but it was literally just the beginning of the fuel price decline, oil price decline et cetera. So you've mentioned that there was a loss on the derivatives in the last quarter and that you hedged somewhere between [$2.50 and $3.50] per gallon on the Jet-Fuel 54 price going forward. But just to better understand, do you have any expected -- any figure you could share guidance-wise what could be the potential loss here on the premium what you paid for the hedging for that 50% level going forward and clearly where do you see -- are you -- what you're basically seeing on the domestic price and what are you targeting and what are your assumptions behind fuel going forward and on the FX side, more importantly? Thanks.

Let me mention something and then Ricardo will jump in with your questions of hedging. First, as you mentioned, in the fourth quarter, basically oil prices of -- the Brent started really to -- it declined by late November, early December. So back, for example, in 4Q, still in October we were paying relatively high jet fuel prices. In the end, with the lower price in dollars and the depreciation of the Mexican peso, we ended up paying in pesos, the reduction was close to 14%. So we increased our volume consumption and that's why the savings were at 10%. So as you mentioned, with the level of fuel prices that we're seeing today, you can't expect, at least for the first quarter, additional fuel benefits than the ones that you saw during the fourth quarter.

Going forward, what do we expect? When we prepare our budgets, we were working with information that we have as of the end of last year, so we have in our budget incorporated higher oil price assumptions than the spot price today.

In terms of hedging, Ricardo will complement me, but let me just emphasize what we've been doing in the past few years is that through our hedging strategy, the only risk that we have is that the premium that we paid for our instruments is valued at zero. So we receive all the positive windfall. So we are in very, very good shape going forward. And with that let me complement, so that Ricardo can give you some additional figures of what we've spent in [lease] options for this year.

Regarding our fuel hedging policy, as Andres mentioned, we [chase] call and call spreads. By the end of 2014 we had basically completed all the programs for 2015. That means that we have already borrowed all the positions and we recorded a [mark-to-market] adjustment of MXN67 million in the quarter and we have been recording impacts in previous quarters, if you see our P&L. Basically, the opportunity or I would say the worst case scenario, considering the position that we had at the end of 2014, is very limited, because we have recorded most of the losses in terms of the value of these positions. We basically recovered 90% of the loss already. So just around 10% and you can see that in balance sheet basically, at the end of the year, it's almost is less than $1 million what is left.

So basically all the windfall with no costs we will have them for 2015?

Yeah. I mean, we have additional mark-to-market adjustments, it will be because we buy additional positions during 2015. But regarding the positions that we had at the end of 2014, we have only $1 million left that we could lose if the value goes completely to zero.

Which we're exploring, considering the lower level -- lower price environment that we're exploring opportunities for this and for 2016.

Okay, that's very clear. So basically there is not much more to come for 2015, only if you were to engage into new call spreads and would have to mark down a couple of the old ones. Correct? If I have understood it correct, $1 million [drift]?

Exactly.

Okay, perfect. Thank you very much. Congrats again.

But even if the [oil] portfolio goes to zero, the impact will be less than $1 million.

Okay. That's good to know. That's what we call rounding error.

Mike Linenberg, Deutsche Bank.

Andres, you had mentioned earlier that the US/Mexican, the revised bilateral is now before the Senate. I guess we need Senate approval. What's the process there, what's the -- how quickly does it come to a vote and any additional comments on timing?

Well, basically, first, this bilateral was negotiated by the -- through the [OTs], then in our side, again, it needs to be approved by the Mexican Senate and I'm not sure that once that happens it will -- the entry of this new agreement, if that happens this year, will be January 1, 2016. Regarding the antitrust immunity, for example, obviously the US carriers have negotiated several antitrust [immune], so it's a figure that it's well known to the DoT and the DoJ. However, it's new in Mexico. So we are working with our antitrust authorities to -- once we have the deal arranged with Delta, to submit the possibility of giving us the antitrust immunity, adjusted legally through the figure that it's equivalent in Mexico, because it formally doesn't exist according to Mexican law.

And then just a second question, you had talked about some of the new service out of Monterrey and indicated that Monterrey was your second main hub. Historically, I always thought that position was held by Guadalajara. So are we at a point now where the Monterrey operation is either larger than Guadalajara? And then longer term, what sort of the plans for your position in Guadalajara, because I'd still believe that you are the Number 1 carrier in that market as well?

Yes, we have placed special emphasis recently in Monterrey and, for example, in 2015, we are planning ASK growth in Monterrey, we'll be close to 40% compared to 2014, basically because all the new flights that we've started last year, we've started them in the second half and they will be obviously -- we will be flying them the complete year. This includes Narita, this includes New York, now well, obviously the new Miami, and we are connecting the center of Mexico with Monterrey, because we believe that we can serve the East Coast of the US better through Monterrey and we are serving the West Coast of the US through a combination of Mexico City and Guadalajara. As you know, in Guadalajara, we started the Contigo product, which has four dedicated 737s, all in Guadalajara. We will continue with that strategy going forward. So [this additional] capacity that we put in Guadalajara will stay there and we are looking for new opportunities to regionally connect Guadalajara as well, but we are not yet ready to make those decisions.

And then if I could just squeeze in one last question. In Ricardo's comments, you talked about how the unit revenue, the RASK in the quarter was the first improvement that we saw since, I want to say, third quarter of 2012, I believe that's what you said, Ricardo. When you look at current trends, how are things trending into the March quarter; March and maybe even June quarter, although I feel like it's maybe too early? Are we going to see a continuation of that RASK improvement?

Yes, I think it's too early to have in our window for the summer. But, basically, I mean what we are seeing in terms of future bookings is probably, again, growth consistent with our growth rate in the Mexican economy, say, of around 3%. So we are seeing a recovery on that front, probably not close to [4%], but probably closer to 3%. So it's again moderate growth in terms of demand and with the capacity that we are having in the domestic market, which again will be between 4% and 6% for the year as a whole, we expect again this positive RASK momentum in the domestic market to continue. In the international market, as we up-gauging the fleet, replacing the 700s with 800s and the 76 with the 78 and adding again an important number of seats in some destinations and frequencies, like Heathrow, to see some pressures, as we saw in the fourth quarter, in later international RASK, which -- those have been offset by the depreciation of the currency. So if you look at our international RASK in pesos, it's positive, because of the effect of the exchange rate. So, in short, I think the momentum is slightly positive, but I wouldn't say that it's a definite recovery that we are seeing significant improvements in revenue per ASK going forward.

Bernardo Velez, GBM.

Congratulations on the results. I was wondering if you could comment on what would be the worst-case scenario of this investigation by the antitrust immunity -- I'm sorry Antitrust Commission regarding the slots at the Mexico City Airport and basically what outcome are you expecting there?

Yes, thank you, Bernardo. Just let me comment -- just give you some feedback. A couple of days ago, on Monday, it was published in the official gazette in Mexico this investigation of the -- our antitrust authority regarding the slot market in Mexico City Airport. As you know, we have a new authority, which changed last year. This investigation is not done -- it's not to a given airline. This investigation is focused on the market of slots in Mexico City and also in Mexico City Airport. All of us, as an airline, we will provide any relevant information that is required from us. That's actually what we informed to the market yesterday as well.

And just to give you some background, there was a similar investigation around three years ago, where one of the operators complained about the market of slots in Mexico City. Nothing back then was found, no recommendations were given. This is another one. And if you look back at what has happened in the past three years, we've moved or the airport has moved towards adapting and using more international standards. So the practices today instrumental in Mexico City Airport for the assignment and changing of slots are basically aligned with international standards, basically IATA principles. So if anything today, we are much more driven by (inaudible) three years ago where nothing was found. But we will follow this closely and obviously cooperate with any information that is asked from us.

And also, I was wondering if you could give us more color on the optional retirement program that you guys have talked about for especially flight attendants, if I'm correct and what did we see during the quarter and what should we expect in 2015?

Yes, as we have the new contract in place for flight attendants since September of last year, so actually we started hiring, because we needed to complement some of the cabins for the first time and that highlights the very good relationship that we have between the union and the airline. We went together to look for 350 posts, job vacancies, in Monterrey, in Guadalajara and in Mexico, and we got more than 2,000 attendees. So that thing was very good, how we are perceiving the market in terms of labor opportunities and these obviously are higher under the new labor conditions. Together with the union, we negotiated a program to induce early retirement, which the people who are eligible to do it have to be more than 15 years in service, among other conditions. And they have, up until the last day of March, to enroll into that program. So we will keep you posted on that and depending -- and give you how many people wanted to access this facility or not.

Marco Montanez, Vector.

Two questions, if I may. According to my figures and correct me if I'm wrong, please. The domestic yields have increased around 6% in year-on-year basis. What should be expected for the next months? I mean the observed domestic yield is sustainable considering the [competence] in the national industry? And the second one, could you tell us your estimates for the capital expenditures requirements for this year, please? Thank you very much in advance.

The domestic yield is roughly along the lines that you mentioned, roughly 6%. Obviously, you know, again as I mentioned before, the fuel price environment in the 4Q was higher than the ones -- that the one that we are seeing in the first quarter of this year. So that obviously, across the industry, across the different regions of the world puts pressures in yields. But again, being conservative on the capacity side, we expect to have at least positive yield [tiers] in the domestic market, again, probably even in the point of sale, Mexico, for international, because of the additional capacity that we are putting, yields will continue to be slightly pressured, but this will be offset by the more depreciated exchange rate. So yields measured in pesos, even in the domestic market -- in international market would also see positive figures.

Let me highlight that we're working from a very low base. If you look at the official statistics of Mexico, which are published in The IGAE regarding to inflation, the average price of air transportation in the domestic market in Mexico in the past 18 months is around 15% lower. So across the industry, yields have been pressured and this -- again, any yield recovery is starting again stressed out from a very low base. Let me have Ricardo complement with CapEx for this year.

We expect this year to have CapEx investment of around $250 million. Of this amount, around $75 million are associated to [pre-payments], around $140 million are associated to engine, particularly engine overhauls and then around $35 million in other projects which we estimate will be associated mainly to e-commerce, as Andres mentioned, which is a big priority for us in 2015.

And it appears there are no further questions. I'll turn the conference back over to management for any additional or closing remarks.

Well, thank you very much for attending this call. And just as I mentioned before, we will continue to work very hard with all the teams here to produce even better results than what you saw for the fourth quarter, maintaining discipline, particularly in cost and again doing our best to strengthen the Company. Thank you very much and have a great day.

This concludes today's presentation. Thank you for your participation.