Controladora Vuela Compania de Aviacion SAB de CV (VLRS) 2019 Q3 法說會逐字稿

Good morning, everyone. Thank you for standing by, and welcome to the Volaris Third Quarter 2019 Financial Results Conference Call. (Operator Instructions) Please note, this event is being recorded.

At this point, I would like to turn the call over to Ms. Maria Rodriguez, Volaris' Corporate Finance and Investor Relations Director. Please go ahead, Ms. Rodriguez.

Good morning, everyone, and thank you for joining the call. With us today is our President and CEO, Enrique Beltranena; our Airline Executive Vice President, Holger Blankenstein; and our Vice President and CFO, Sonia Jerez.

We will be discussing the company's third quarter results announced yesterday. Afterwards, we will move on to your questions. Please note that this call is for investors and analysts only. Any questions from the media will be taken separately.

Before we begin, please let me remind everyone that this call may include forward-looking statements within the meaning of applicable securities laws. Forward-looking statements are subject to several factors that could cause the company's actual results to differ materially from expectations for reasons described in the company's filings with the U.S. Securities and Exchange Commission. Furthermore, Volaris undertakes no obligation to publicly update or revise any forward-looking statements.

It's now my pleasure to turn the call over to Volaris' President and CEO, Mr. Enrique Beltranena.

Thank you, Maria Elena. Good morning, everyone, and thank you for joining us today. As published in our earnings report released yesterday, Volaris delivered a strong quarter performance that is the result of a solid team effort, which includes all of our ambassadors and the company management.

Let me begin with some key facts and data of the third quarter. EBITDA margin improved by 7.6 percentage points versus last year, closing at 34.6%. Total operating revenues increased by 30% year-over-year. Total ancillary revenues increased 36% year-over-year. Volaris ancillary revenues per passenger increased 14%, a new high level. TRASM continues improving 11% year-over-year. Total ASMs grew 17%, in line with our stated guidance. The RPMs increased by 19%, and load factor for the quarter was 85%. Domestic load factor was 87.5%, and Volaris sustained its #1 position in the domestic market.

International load factor of 80.1% shows a steady transborder market, where we experienced stronger loads in our BFR traffic segment. The most important one, CASM ex fuel during the quarter was USD 0.0399, and on-time performance is on track and scheduled reliability is at 98.9%. Volaris retained its place as the most punctual airline in Mexico. Return on investment capital pretax of 21% at the end of the quarter, and the earnings per ADS year to September end at USD 0.68.

There are 3 main achievements supporting Volaris' growth in the last 12 months. The first one within Volaris' network in terms of capacity deployment and expansion comes the complete structural network change in the market. Volaris now has the strongest point-to-point network schedule offer and frequencies in the domestic market. Volaris is the only carrier in the history of aviation in the country -- I want to repeat this number, only carrier in the history of aviation in the country that has transported over 20 million passengers during a 12-month period. In the last 12 months, on top of that, TRASM improved 11%.

Our ultra-low-cost capacity growth, driven by low offers, induced 2 of our main competitors to downsize in the domestic market and to instill focus on their international operations. We believe Volaris can continue growing at a higher pace than our high-cost competitors given our sustainable cost structure, our unbounding flight pricing strategy with constant growth in ancillary revenues and our focus on flying in underpenetrated air travel market, which has been augmented by Mexico's expanding middle class.

The second reason is that the competitive environment has been rational in both the domestic and the transborder market. The grounding of the Boeing 737 MAX aircraft and Sukhoi fleet in Mexico had to reduce certain segments of capacity. Some of our main U.S. and Central American competitors have redeployed capacity to other geographies. And all in all, both markets have enjoyed a better base fare environment due to a much more stable capacity. We know that the lowest unit cost always wins. Volaris' ultra-low-cost position in our cost trend and main differentiator going forward is this lowest cost. This gives us an advantage and enables us to keep growing at a fast pace with the right fleet.

And the third reason is that from the macroeconomic perspective, Volaris continues benefiting from several economic factors, which are to Volaris' model, such as remittances, employment, consumer confidence, jet fuel price and foreign exchange remained stable in the last quarter, so we think we can keep on performing the way we are performing.

We plan to finish the current year with an ASM growth of 17% and forecast a full year EBITDA margin in the ballpark of high 20s, assuming current foreign exchange rates and fuel prices remain stable for the rest of the year. For 2020, we expect higher capacity into the market, mainly due to the return of the Boeing 737 MAX, and additionally, we observed some softness in the private investment in Mexico, which is impacting the GDP. Therefore, we are planning lower growth than in 2019 and estimate an ASM growth of 10% for 2020. Depending on TRASM's trends, we foresee an up or down 2 percentage points flexibility in capacity. And most of this capacity will be added to our core markets, and we will continue to improve utilization of assets, resulting in healthy capacity growth.

Now I would like to turn the call over to our Airline Executive Vice President, Holger Blankenstein, to comment further on the extraordinary results of Volaris during the third quarter. Holger, please.

Thank you, Enrique. The numbers speak for themselves but let me take you through a little bit more detail. We are observing a healthier competitive environment, as Enrique mentioned earlier in the call. This, combined with strong market demand in Volaris' core markets, result in higher TRASM.

Turning to specifics on Volaris' performance. ASM growth was 17% in the third quarter, in line with our previous guidance as a result of higher utilization, new routes and the focus on core markets. We have taken advantage of the new capacity by allocating it to core markets and spread operations over more hours of the day. This allows us to increase the percentage of night flight, which are especially popular within the VFR core customer segment.

Domestic ASM growth for the quarter was 15%. VFR traffic and the bus market remained the most important drivers of growth. Volaris fares in the bus -- in bus trips over 6 hours are lower than the bus fares and 26% of our capacity is now only computed against the buses. We have been diversifying our point-to-point network through connecting the dots between existing stations. This year, we added just 1 new station, taking advantage of economies of scale in current airports. We are expanding our presence in medium-sized cities that did not have a strong network, building our -- building on our success in Guadalajara and Tijuana. Volaris now serves 122 routes in Mexico.

In the international markets, our ASM capacity growth was 21%. We continue observing a more sustainable transborder market. The VFR segment show solid demand, supported by remittances from the U.S. Volaris now serve 69 international routes. Capacity in Central America represented only 3.4% of total ASMs by the end of the third quarter. The region is maturing well and contributing to our U.S. dollar-denominated revenues. In the third quarter, we started operations on 2 new international routes from existing stations in Central America in order to continue developing our point-to-point services and attracting first time flyers. The codeshare with Frontier is maturing according to our plans. During the third quarter, it represented 2.7 percentage points of load factor on U.S. routes.

During the third quarter of 2019, total ancillary revenues reached MXN 3 billion, an increase of 36% year-on-year and now represents 32% of total operating revenues. We have been working on our new ancillary profit maximizer tool. This is an automated pricing tool that seeks optimal pricing for ancillary products through artificial intelligence. Whilst we are still on a learning curve, it has already demonstrated that we are able to identify and offer customers what they need and price those products using a smart algorithm with current supply and demand.

Regarding our travel experience platform, YAVAS, we have been validating the business model and is performing in line with expectations. Today, our membership programs v.pass and v.club and the cobranded credit card with a local bank in Mexico, allow us to both engage and offer benefits and discounts to our frequent travelers. This, alongside our strategy of offering the lowest base fares, has allowed Volaris to generate, in our own way, a base of core customers without the high cost associated with a traditional loyalty program. The rise in ancillary revenues enables us to continue to offer the lowest base fares, stimulate volume and to grow travel, which has increased 11% year-over-year for the third quarter.

We believe Volaris can further expand not only its revenue base, but also bus -- the bus switching market through the improvements in our digital channels. The company uses social media strategies to attract first time flyers and new generation to the business. Through social listening, algorithms and patterns, we are generating new initiatives to improve our customers' experience at the moment of purchase during their flight and after they arrive at their destination. More than 25% of our total sales are made through the mobile phone, which reinforces our lowest unit cost structure.

Digital initiatives such our Facebook chat bot, which customers can use instead of the traditional call center also contribute to our low-cost business model. We are investing in an upgrade of our digital channels in order to make volaris.com much faster and easier to use, with an additional focus on mobile-only buyers. We are also in the process of adding functionalities to the Volaris app to facilitate a mobile-only, self-service customer experience, which in time, will also reduce customer service costs.

We are especially pleased with the strength of the VFR traffic. Therefore, we are now planning ASM growth for the fourth quarter in the high teens for the entire network, relatively evenly split between international and domestic growth. It is important to highlight that we are planning to achieve it through healthy capacity growth, which means a high utilization of existing assets. We are keeping up the year with a positive revenue momentum and delivering margin improvement.

Looking forward to 2020, we plan to continue to grow around 10% in terms of ASMs, with a balance between the domestic and the international market. However, for the first quarter 2020, this number may be higher due to a lower base comparison for the first quarter of 2019. We currently plan a fleet growth of only 5 net additional aircraft and we will monitor market conditions closely for potential more additions during the year.

Now I'd like to hand it over to our Vice President and CFO, Sonia Jerez, to further discuss our financial performance for the quarter.

Thank you, Holger. I will now review the financial highlights of the third quarter. To start, CASM ex fuel closed at USD 0.0399 where the most important drivers were due to: first, the healthy capacity increase in ASMs was driven by higher utilization of our fleet. The average aircraft utilization for the quarter was 13.2 block hours per day, an increase of 0.6% year-over-year. Second, the operation of a high -- of a right-sized, fuel efficiency comprising 1 single aircraft family type, with an average of 186 seats per aircraft, where 26% of the fleet is equipped with NEO technology. And third, the continuous company-wide cost reduction program, with initiatives implemented in headcount reduction, airport suppliers, among others. So total CASM was USD 0.0636 for the third quarter, a 2.6% reduction over last year. During the third quarter, Volaris received a positive response from the domestic jet fuel tender previously launched. We are able to renegotiate the transfer cost and reduce the previous increase by 1/3 from our domestic fuel supplier.

Moving to cash, net cash flow from operating activities for the third quarter was MXN 2.2 billion. Cash and cash equivalents for the third quarter closed at MXN 7.8 billion. This represents 24% of the last 12 months' operating revenues. The adjusted net debt to last 12 months EBITDA margin was [4].

At the close of the third quarter 2019, the Mexican peso had depreciated 4% against the U.S. dollar compared to the end of the third quarter 2018. Nevertheless, the company's third quarter U.S. dominated -- dollar-dominated (sic) [dollar-denominated] collections were 43%, partially helping us to insulate the company from exchange rate pressures and reflecting our effort to have a natural hedge from a diversified network.

Looking at the last quarter of the year, we have existing fuel hedges for 30% of the expected jet fuel consumption through Asian call options. We have already started building our hedging position for 2020, with a 20% coverage of the expected jet fuel consumption for the year through zero cost collars.

Regarding our margins, we met our previous guidance for EBITDA margin in the third quarter, reaching 34.6% or MXN 3.3 billion and a 17.9% EBIT margin or MXN 1.7 billion. Net income margin for the quarter was 7.5% or MXN 713 million.

In terms of fleet, during the third quarter, we added 2 A320neo aircraft to our young and fuel-efficient fleet. We ended the third quarter at 80 aircraft versus 77 at the beginning of the year. To finalize, I would like to mention that in the fourth quarter, we will receiving 1 A321neo and 1 A320neo. We will close the year with 82 aircraft.

Okay. Now I hand the call back to Enrique for closing remarks.

Thank you, Sonia. Volaris wants to reinforce its commitment to ensuring value for our shareholders and for our customers by having a strong and thriving airline. We work hard but at the same time, we have a lot of fun. We have built a strong company culture with a dynamic, delivery-focused team that does things differently, efficiently and well aligned to our mission. With the best people and lowest costs, we enable more people to travel and travel well. Thank you to all of the Volaris ambassadors for their passion, commitment and the deliveries of this quarter. Here we are after 15 months of continuous improvement, the company's main metrics continue to outperform. These numbers are a proof of the efforts made by all of our ambassadors, our management team and our Board of Directors. And for this, I thank them.

Thank you for listening to this call. And now operators, we're ready to take the questions from our analysts. Please go ahead.

(Operator Instructions) And our first question is from Helane Becker from Cowen.

So well done, guys, on this quarter. Just a couple of questions. In terms of -- I think someone said you had 5 aircraft coming in next year. Is that like final? Is there any ability to grow more with more aircraft next year? That's my first question. And my second question is, do you have an estimate for CASM ex for 2020?

Thanks, Helane. Thank you for listening to our call. Look, the 5 aircraft is a net number from deliveries first. And the second is, as I said, we really want to pay attention to TRASM, and we can still grow up about 2% up if needed, okay? But we want to really stick to the number we have now. Next year, it's going to be a difficult year for deliveries from aircraft, both in Airbus and Boeing. So we need to pay attention to that delivery schedule and how we -- how it goes.

The second thing, which is important, Helane, is what we said in terms of the Boeing being back. So I would strongly say that we need to watch out what is going on. We don't want to overload capacity into the market and we want to be very capacity conscious for next year. Finally, on CASM, we still don't have a view for next year.

And our next question comes from Michael Linenberg from Deutsche Bank.

Just a couple here. One, this is just sort of a small housekeeping item. Sonia, you talked about the fuel hedge, 20% for 2020. Can you tell us, is that uniform? Or is it higher at the start of the year? And maybe any sense of where those collars have been struck?

This is uniform along the year, so 20% each quarter.

Okay. Okay. And any sense -- or a sense of maybe where the strike or sort of where that collar is? That range?

Yes, for sure. So we have the average strike price of options is 1.64 and 1.82.

Okay. Okay. Great. Just second question, Enrique, I think in your comments, you talked about your percentage of night flights have increased. Obviously, the VFR market likes those flights. Where is current utilization on the Airbus fleet today? And where do you -- where can you take that? Can you get that to somewhere between 13, 14 hours? Is that -- what's the right level for your fleet?

Yes, Michael. So absolutely, the utilization right now on the average of the year is 12.8 hours for the entire fleet. We believe that we can take that up closer to 13 hours in the following year. And 13 -- sorry, correction, 13.2 hours. That was for the third quarter. On average for the year is 12.8. For the third quarter, it was 13.2, so we manage our utilization quite seasonally. So in the high season, in the highest days of high season, it can go up to 14 hours. And then in the low season, February and September, it would go below the 13-hour mark. But we continue to work on a high utilization, and we believe that we can up that next year just a little bit more.

Okay. Great. And then just my last question, and I normally won't ask this to speak about competitors, but I do find it interesting that 2 carriers that I view as being very successful airlines have completely withdrawn from Mexico City. And whether it was Southwest pulling out of that market, and I think that there was the comment or the criticism was that maybe their systems didn't allow them to capture the market as they wanted to capture when they went into it, but then to see JetBlue pull out of 4 different city pairs effective early January. I understand when airlines that are financially weak can't sustain a market, but I would have thought that for at least 1 or both of these carriers, like Houston, Mexico City, or JFK, Mexico City would have been strategically important markets and that they would remain in them. What -- just from your side, I mean I know that you're lower cost -- you're one of the lowest cost carriers out there, and you're certainly lower cost than Southwest and JetBlue, but the fact that they couldn't make those markets work, and I don't know if it's that there's too much competition. Or maybe the relative costs are too high? Any comments that you see on why even some of the more successful carriers are just -- are withdrawing from a big market like Mexico City? They can't make it work. Enrique, that's to you and Holger.

No. Look, we normally do not comment about competition. But I mean let me answer. I think that the cost difference is doing a hell of a change in the market, okay? And I think what you started seeing in the domestic market and how the lowest cost operators already dominate more than 50% of the market and have the leadership of more than 50% of the market, it's starting to happen in the international market, okay? And differences of costs versus those 2 carriers are 65% or more. So I strongly think that what you are seeing is exactly the same move of what you saw in the domestic market. On the other side, I think the Mexico City airport continues being a hell of a challenge.

Yes. I'd say it's a tough airport to operate out of. Is there -- do we have a solution on the horizon? Is Santa Lucia, is that -- do you think that, that is a feasible solution?

Look, the company has been growing its traffic in a very nice way, and we have outperformed financially and TRASM continues to be very strong in general. We are watching very carefully the development of the Santa Lucia plan. The government recently presented the strategic plan to us and do -- we do have now more information. Construction hasn't even started and we see this in the horizon, which is still not clear for us. But we think that we are an airline, which has a low-cost structure and additionally, we think that not being in the most important hub, it's always helpful for a low -- for an ultra-low-cost carrier. So we're looking forward to see what happens with that project, although we don't see that project in the next 3 years happening, okay?

In the meantime, we keep on working as much as we can, developing our capacity in our strong city pairs related to Cancun, Tijuana and Guadalajara, and we continue reinforcing the point-to-point structure of the network, which is really bypassing Mexico City in most of our cases. I just want to remind everybody that we are only less than 14% of the total seats that are installed in Mexico City, and the company has outperformed so far despite not being in Mexico City.

Our next question comes from Duane Pfennigwerth from Evercore.

So look, high ancillaries and load factor, that's been a part of the model but I think the surprise for us has been more on the yield side. Can you talk about what is driving the improvement in yields? Is it more a function of transborder? Is it more domestic? What do you see that is driving this improvement?

Duane, absolutely. So I think it's a little bit of both. As we just mentioned, we are seeing some capacity reductions from competitors in the transborder market, and that's not only Mexico City, that's also Guadalajara and some other destinations in the center of Mexico. That has clearly helped. We see a very robust VFR market, strong remittances from the U.S., which is an indicator for transborder traffic. And in the domestic market, we've seen high consumer confidence, and that's driving the traffic for low-cost carriers, very good strength in the beach destinations in Mexico, people going on vacations in Mexico with our airlines. So that has helped demand in Mexico. So we're seeing a little bit of both, strong transborder market and a healthy domestic environment.

I would probably underline what Holger said, which is really important that despite our 17% year-to-date capacity growth, we are still growing TRASM 11%.

It's very healthy for sure. And then just on Central America, can you give us an update there? How many of the net 5 aircraft will be deployed to support that operation? And I know it's small today but to the extent that you have overlap with competitors that are restructuring, what are you seeing in the marketplace as a result of that capacity reduction?

Look, there's 2 things that I think are important to remind you guys. I mean the Costa Rican AOC in terms of flying to the U.S. remains frozen because of the category downgrade performed by the FAA authorities. So we are watchful, waiting what's going on there. And we understand that there has been an important progress of the corrective action plan, and we're seeing positive towards the first quarter of next year.

The second thing is we -- the FAA carrier of [Tanayasa audit to] El Salvador Civil Aviation Authority, the AAC. And as a result, the certification process to obtain the final operation permit is still on a temporary basis, suspended. We strongly think that we'll resume the process once the local authorities are ready to proceed. But bear in mind that this does not affect our current operations from El Salvador to the U.S. or other destinations, which are being flown by the Costa Rican AOC. So in general, we are ready to keep on growing in Central America, but we are living a challenged time from the regulatory perspective, which we are supporting the authority -- in which we are supporting the authorities to really overcome it as soon as possible. And given the fact that we [will record] these issues in the first quarter or sometime in the beginning of next year, we'll be communicating to everybody what we'll be doing in terms of capacity. Just to remind you, Costa Rica AOC still only represents 3.4% of our total ASMs, so it's still a small bridge.

And our next question comes from Josh Milberg from Morgan Stanley.

Congrats on the results. My first question is if you could talk a little more about the issue of the fuel surcharges. I believe that Sonia mentioned the reduction by 1/3 due to the latest tenders. And with our own back of the envelope calculations, we did see a meaningful sequential decline, but not back to the levels seen in 2018. So one of my specific doubts there was just whether we could expect to see a further decline of your interplane cost in the fourth quarter.

Well, as I mentioned, Josh, so -- and as you're saying, so the gas fuel tender that we launched, we're able to reduce our increased costs by 1/3, and this is going to be more clear in quarter 4. But I don't think so that -- I don't think we will be able to further -- with the current situation, further -- to have further reductions in the coming year.

So in a nutshell, what's going on, Josh, is that Pemex has done an increment on the transportation costs, mainly ground transportation costs. We are a heavy operator in the middle of the country and the northwest part of the country. And sometimes, getting to our stations, and since we have that big coverage that we have today, we are -- we have that impact of the transportation of the fuel towards those places, okay? As Sonia said, the negotiations that we did with ASA, which is the main supplier for every airport in the country, was a big challenge but she was able to manage 1/3 of the reduction. But we are, by no means, back to the levels we used to be.

Okay. That's a very helpful explanation. And my second question is if you could just review for us your degree of overlap with Aeroméxico. And maybe touch on how much you think your RASM was boosted by your competitors scaling back of capacity in the domestic market, just due to the MAX grounding. I ask that in part because it really hasn't been so easy to explain the strength of your unit revenues this year, even with all the factors that Holger highlighted in response to an earlier question. Just given how tough the macro backdrop is right now.

So Aeroméxico operates about 80% of their ASMs from Mexico City International Airport. And as Enrique mentioned previously, we are more focused on the core cities: Guadalajara, Tijuana, Cancun. Our current overlap in terms of ASMs is about 50%. And what we understand from the MAX groundings is that it affected more the international markets to the northern tip of South America for Aeroméxico, so it didn't affect the domestic market significantly.

And our next question comes from Stephen Trent from Citi.

I just wanted to appreciate the color on capacity growth for next year. If you could just kind of refresh my memory, what kind of ability does -- do you guys have to maybe flex down in that 10% growth number, in the event that competitive capacity kind of goes beyond the limit?

As I said, Steve, again, and I want to underline it once again, the driver is TRASM, okay? And the -- and what I said is that we can go up a couple of points up, but we can also reduce that a couple of points down, okay? If the driver will be the behavior of the TRASM, which bottom line it's what drives profitability and return of investment for our investors.

Okay. That is very clear, Enrique. And just one other question, if I may. I mean kind of a follow-up on Duane Pfennigwerth's question earlier. Within the Central America market, competition-wise, I mean we know there's been kind of 1 carrier out there undergoing a big restructuring and what have you. But any granularity, for example, on what you're seeing from maybe the U.S. airlines pulling back in that area? Has that created any opportunity for you at all, even as I recognize Costa Rica has this regulatory issue hanging over it?

So Steve, look, we have seen the capacity from the U.S. carriers kind of stable, a little bit growth, but kind of stable in the last 9 months since the category issue was announced. We obviously have seen some reductions, especially out of Guatemala. Avianca did a reduction of important number of routes out of Guatemala. The routes out of El Salvador, which is their main hub has minimal movement. And I don't think they are being reduced as part of the restructuring of their network. And finally, just to remind you, is that we are a visiting friends and relatives airline, okay? And our capacity is driven by how the visiting friends and relatives move themselves within Central America to the U.S. and I think that's also remained kind of stable. And it's not related to business traffic, which is broad -- business traffic or tourism, which is pretty much what the U.S. main carriers drive into Central America.

So I think which is really important to add to this is that the operation in Central America is already profitable and has been profitable for the whole year.

And our next question comes from Ruben López from Santander.

Congrats on the results. I have 2 questions. My first question is on ASM guidance for 2020. You mentioned that it could be adjusted according to the performance of TRASM. So just wondering what TRASM level that you are considering as a base case scenario for your 2020 guidance? And at what point would you consider to adjust the plus/minus 2% of capacity? That's my first one.

We're planning to sustain our TRASM levels for the next year. We clearly have never given a guidance on it. What we're trying to say is that we will really reinforce the fact that TRASM has to be sustainable and capacity will be driven by that. The amount of reduction or incremental capacity based on the movement of the TRASM, it's going to be somehow very close to what we did this year. I mean this year, our TRASM all over in the year improved 11%. Our capacity went up 17%, okay? We -- as I said, we can play with the capacity, especially because of utilization going up or down. But this is -- the couple of points is where we think we can be.

Okay. Really clear. And the second one, sorry if I missed this, but can you give us just a guidance for the next quarter? I got the ASK growth at high teens, but in terms of margins or cost, are you giving any indications here?

No. We gave you the ASM guidance for the third quarter, which is in the high teens, and we're going to close the year with a 17% total ASM growth for the year. And that's it.

And our next question comes Matthew Wisniewski from Barclays.

So I just wanted to kind of look at margins after a really strong margin performance this year, and I appreciate the commentary on having some flexibility on the growth plan. But I'm trying to think if we can keep revenues kind of consistent. Or even if there's some cautionary growth, given some additional growth coming into the market. Is there a potential for improvement on the cost side? I know you've laid out a few initiatives. Could that potentially offset and maintain this level of profitability heading into next year?

Look, there's a combination of 2 or 3 factors that can impact, okay? We provided that jet fuel and exchange rate remains stable or that we kind of maintained that equation stable. The rest of the costs can be maintained at the level they are. Next year, I mean as we start going forward, we are accelerating our returns and exchanging those aircrafts with new fleet, which produces an 18% cost reduction in terms of fuel. So the delivery costs are incrementing as we incorporate the new fleet. But then on the other side, we'll compensate with the lower fuel cost. So in general, we think that we can maintain our equation, and Sonia has implemented a new plan, which has been driven by [Martin C.] and we will keep on doing reductions on costs on the rest of the issues, on the rest of the lines, so we can compensate the return costs.

Okay. Great. That's helpful. And then I was just hoping that maybe you could share potentially a little bit more information on v.pass. It's kind of a unique program. If you just look at airlines globally, just have you had a competitive response? How large? What's the growth like? Any details you can provide would be helpful.

Well, v.pass is a membership program where it's basically a 12-month subscription. So we lock in customers for a 12-month period, and we give them really, really cheap fares for 1 flight per month. That has been taken up very positively by the market. It's a program that we're pushing, we're growing. And we currently are growing the membership base. The more important program that we have is the v.club, which is a 1-year membership that gives you access to discounts on the public fares. And there, we have a substantial amount of members.

And it does appear there are no further questions over the phone at this time. I'd like to turn it back to the speakers for any closing remarks.

So thank you very much to everybody. Thanks to our ambassadors again. And thanks for your questions, your interest, and thank you very much for following this track of 15 months that -- of improvement of results. We will keep on performing, and we thank you very much again to everybody. You can end the call now, operator, please.

This does conclude today's program. Thank you for your participation. You may disconnect at any time.