Controladora Vuela Compania de Aviacion SAB de CV (VLRS) 2023 Q1 法說會逐字稿

Good morning, everyone. Thank you for standing by. Welcome to Volaris' First Quarter 2023 Financial Results Conference Call. (Operator Instructions)

This event is also being broadcast live via webcast and may be accessed through the Volaris website. Those following the presentation via the webcast may post your questions on the platform. The management team will answer them during this call or the Volaris Investor Relations team will answer them after the conference call is finished. (Operator Instructions)

At this point, I would like to turn the call over to Ricardo Martinez, Investor Relations Director. Please go ahead, Ricardo.

Good morning, 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 Chief Financial Officer, Jaime Pous. They will be discussing the company's first quarter 2023 results. Afterwards, we will move on to your questions. Please note that this call is for investors and analysts only. Before we begin, please remember that this call may include forward-looking statements within the meaning of applicable securities laws.

Forward-looking statements are subject to several factors that could cause the company's results to differ materially from expectations as described in the company's filings with the United States SEC and Mexico's CMBB. These statements speak only as of the date they are made, and Volaris undertakes no obligation to update or modify any forward-looking statement. As in our earnings press release, our numbers are in U.S. dollars compared to the first quarter of 2022 unless otherwise noted.

And with that, I will turn the call over to Enrique.

Thank you, Ricardo, and everyone, for joining us today. During the first quarter of 2023, we diligently delivered results in line with our full year guidance for capacity, load factors, fare levels and ancillaries. Equally important, we experienced sustained demand across our system. Our guidance for the year is still valid and maintained. We expect market demand to accommodate well within our full year capacity guidance of around 10% ASM growth. We will continue to focus on delivering EBITDA margin expansion this year in a 29% to 31% range, an increase of 9 to 11 percentage points versus 2022.

I want to start by highlighting the results from the quarter. Total ASM increased 18% year-on-year, including a growth of 15% in domestic and 24% in international markets, highlighted by greater than 100% expansion in Central and South America. Higher ASM growth was also driven by better utilization of our A321 fleet with revenue passenger miles per departure increasing by 20%.

It is essential to note that versus the first quarter of 2019, our ASM grew around 66%, a testament to how Volaris took advantage of a once-in-a-lifetime opportunity to grow during the pandemic. The Mexican airline industry has undergone landmark consolidation in the last 3 years, much like the U.S. industry did in the previous decade. With the recent disappearance of Aeromar, our domestic market now has 3 leading carriers that offer competitive cost service and handle around 99% of the passengers in the domestic market.

This landscape sets the stage for a future where we expect increasing profitability for the Mexican market. As expected, our capacity grew faster in the first quarter than our 10% annual guidance as our deliveries for the year are front-loaded into the first half. In the second half, we expect a rich offer of capacity from domestic to international and grow in Central America provided regional tailwinds continue. To be clear, the 18% quarterly capacity growth was a pull forward in our planned expansion for the year.

Given well-known Airbus delays and lower-than-expected time on wing of Pratt GTF engines, we decided to leverage the flexibility in our fleet plan to accommodate earlier deliveries, extend 3 aircraft the red deliveries and acquire engines. Due to these actions, we do not expect disruptions during the second quarter, and we do not believe today that any of our capacity deployment plans for the second half are in [Gopani].

This year will mark a new era for Volaris as we are set to receive the first Neo Delivery from the largest ever Airbus order placed by us along with Indigo's portfolio airlines. The scale of this order allows us to reduce our CASM ex fuel in the future structurally, thanks to more favorable fleet ownership costs. In short, our plan will drive further efficiencies, low-cost going lower. Volaris has carefully developed a finance plan to support our CapEx needs for 2023, and we do not expect our capital expenditures to impact our deleveraging objective for this year.

Overall, our company and our markets continue to show strength. Demand during the first quarter was healthy in all segments and regions. TRASM increased 10% year-over-year to a new first quarter record of USD 771 surpassing the former record sport by vaccination travel last year. At the same time, CASM ex fuel was $0.0465, reflecting our continued strict cost control management.

Volaris remains one of the top unit cost operators in the world, and cost control continues to provide us with competitive advantages. In sum, this is more than just a critical cost control story. Volaris cost advantage versus U.S. carriers has while allowing us to grow with profitability in the cross-border market once Category 1 is restored.

Finally, during the first quarter, we observed positive indicators such as low unemployment rates, robust remittance flows and high levels of foreign direct investment associated with the nearshoring trend. Moreover, federal subsidies on diesel prices are being phased out, giving us a level playing field versus bosses. To illustrate last year's sharp increases in oil prices prompted the Mexican government to subsidize the cost of diesel, the primary fuel used by buses. However, with the recent 50% reduction of the diesel subsidy, we have regained the advantage.

We believe nearshoring is an economic reality here to stay, representing a robust and differentiated tailwind to our medium- to long-term growth. At Volaris, we have established ourselves as the leading airline in several near-shoring epicenters. We are in the right country, industry and segmentation to capitalize on the potentially decade-long nearshoring trends. I'm pleased to inform you that the Mexican Congress approved amendments to aviation law last week. This week, the Senate is expected to vote on amendments to the law, and we are optimistic about a positive outlook.

We anticipate that the new law will be published in the official gaze within the next 2 weeks, allowing the authorities to request the final IAS assessment, which is projected to occur by the end of May or early June. Assuming a favorable assessment, we expect the U.S. government to fully implement Mexico's category 1 upgrade in a few months. I want to point out that the amendments do not allow Cabotage to foreign carriers. As we have stated, our guidance assumes that Category 1 will be commercially operative in the fourth quarter, and we stand ready to be nimble should it happen soon.

I will turn it over to Holger, who will provide greater detail on our first quarter commercial and operational dynamics.

Thank you, Enrique, and Good morning. The first quarter of 2023 was another strong quarter operationally, enabled by the flexibility in our network as we saw some continued differentiation in demand in our geographic markets. Starting with capacity. As Enrique mentioned, ASMs increased by 18% year-on-year for the entire network, including growth of 15% in domestic and 24% in international markets, highlighted by a greater than 100% expansion in Central and South America.

That said, our fleet and network plans are flexible if market demand persists or category 1 as restored before expected. As we also staked out in the last quarter's call, given some softness in close-in volumes domestically, we have been moderating base fares in the Mexican market while capitalizing on robust demand in our international segments, where we have been raising our base fares. The combination of these approaches generated a solid 85% load factor for the quarter, up 1.5 percentage point from a healthy 83.5% result in the first quarter of 2022.

Underscoring this result is that more significant expansion and higher fares in our international market haven't been dilutive. TRASM grew year-over-year to a record of $7.7, up 9.5% on a 20% increase in RPM. We also remain nimble with our network. We have not only optimized the productivity of our fleet, but we are also reducing growth rates in the second half of 2023, like we are seeing from our domestic competitors. For the same reason, we expect to accelerate our plans to redeploy aircraft to Central America to fly to the U.S.

For the U.S. Mexican transborder market, we will reassign at least 4 airplanes to U.S. bound routes once Category 1 is reinstated, reopening our pathways to the U.S. while taking pressure off the domestic Mexican market. These routes will take 2 to 3 months to ramp up before becoming fully operational, which aligns with our projections of restoring our CAT 1 related capacity by the fourth quarter. Additionally, we plan to redeploy up to 3 additional aircraft this year in the Central American market, reaching 9%, up from 6 aircraft representing 8% of our total capacity. In the first quarter, we launched operations in our 3 previously announced Central America to U.S. routes in Santa Lucia to Miami, San Salvador to Houston and San Salvador to Oakland.

Additionally, we opened for sale San Salvador to Ontario and California. Domestically, in Mexico, we introduced 2 new routes during the quarter, one from Guadalajara to Puerto Vallarta, which has opened for sale, but it's not yet operational and one from [Hikary] to Los Cabos, which will be opened later in the year. The routes we launched last year from Toluca and Philip Angeles continued to ramp up as expected, and we are maintaining around 30 aircraft flying from Mexico City International Airport.

Critically, we enjoyed strong adoption of ancillaries in the first quarter, particularly in our international market, where these offerings functioned exactly as intended, a key offset to enable lower base fares within our network. Ancillary revenues per passenger came in at $42 a record. As a proportion of our total operating revenues, ancillaries climbed to 47%, up from 43% in the first quarter of last year and 42% in the fourth quarter of last year, representing continued progress towards reaching 50% of our total operating revenues.

During the first quarter, we implemented significant changes to improve our customers' purchasing experience. We reduced the number of bundle options available in our website from 6 to 3, simplifying the selection process. Additionally, we introduced a 0 ticket, which is a completely unbundled product exclusively for v.club members.

This strategy increased dramatically our v.club memberships and was also a key driver for our first quarter ancillary revenue result. It will also generate repetitive purchases in the future. These add-ons help us realize additional ancillary revenues per passenger and allow Volaris to moderate base fares to compete more effectively. This premise is crucial as we analyze the weakness in close-in bookings within our domestic market.

While most of our customer base tends to book flights in advance to take advantage of our low fares, close-in passengers typically pay higher fares for these flights. Our strategy to drive growth in ancillary revenues allows us to adjust our base fares for last-minute bookings to achieve our target load factor. As ancillary revenues for close-in bookings are less price sensitive than base fares, these ancillary revenues offset base fare reductions and delivered a higher revenue per passenger.

Overall, we continue to successfully convert (inaudible) passengers to first-time Volaris flyers by stimulating demand through promotions and low base fares and then retaining them as loyal customers. As an example, during our 17th anniversary promotion, we sold 1.6 million tickets. Another initiative to generate new travelers is the launch of our loyalty program. Through FEMSA OXXO, the largest retailer in Latin America, we will have access to more than 20 million users already signed up in the program.

The program is expected to be the largest affinity platform in Latin America. Our first quarter operational performance demonstrates our continuous efforts to optimize operations and maintain our industry-leading performance. We achieved 883,000 ASMs per aircraft daily an average of 13.5 daily block hours and generated 107.2 ASMs per gallon of jet fuel consumed, a 3.3% improvement from last year's first quarter. As we look towards the summer, booking curves remain solid in the international markets, where we continue to meet robust demand in Central America and the United States.

We are confident in our current growth plans and have positioned ourselves to execute them with agility and flexibility. Our strong track record of quickly adapting to changing circumstances and seizing opportunities, such as the potential return to CAT 1 gives us the confidence to adjust our plans to achieve our guidance. We anticipate several upsides for Volaris once Category 1 status is restored.

First, we may obtain regulatory approval on additional routes from Mexico to the U.S. further capitalizing on our widening cost advantage versus peers. We will also be able to add to our U.S. (inaudible) specs, about 30 neo aircraft, which we have taken delivery of since the downgrade. With category 1 effective, we can use these aircraft on U.S. international flights, maximizing their greater efficiencies within the fleet on longer routes. We have also staked out a plan to realign our capacity within our markets, which we will announce following the category upgrade.

Finally, Volaris codeshare with Frontier will be immediately reactivated upon the upgrade, expanding our international market and U.S. point-of-sale presence. One of the remaining open items is the passage of a reformed aviation law. Now that the proposal of the adjusted aviation law has been improved in the lower house, we're looking forward to the Senate's approval, which will enable us to continue to further strengthen our position as a leading international airline.

I will now turn the call over to Jaime to discuss our financial performance for the quarter.

Thanks, Holger. Our first quarter financial results align with our expectations and full year guidance, underscoring the stability of our financial performance over time. Total operating revenues for the first quarter came in at $731 million, a 29% increase compared to 2022 driven by solid international demand and ancillary revenue per passenger, increasing from $35 to $42, which resulted in a 9.5% higher unit revenue. We remain focused on improving our financial performance and managing costs, the training CASM ex fuel aligns where we discussed last December at our Investor Day.

We anticipate that cyclical maintenance events will continue to increase for the remainder of 2023 and 2024 before gradually returning to 2019 levels. This increase is attributable to our ongoing transition to newer aircraft and maintenance cycle due to our current vintage. Our CASM ex fuel accounted for EUR $0.465, an increase of 5.7%. This increase was mainly due to the appreciation of the Mexican peso, affecting the translation into U.S. dollars of peso-denominated cost items, such as labor and G&A.

During the quarter, we will deliver cost accruals of $35 million. On a unitary basis, this represented $0.37. Our adjusted CASM ex fuel, which excludes fuel were liveries and in and leaseback gains totaled $0.428 compared to $0.0403 in the first quarter of 2022, an increase of 6%. Total CASM was $8.03 for the first quarter, an 8% increase compared to the first quarter of 2022.

Reflecting the seasonality in our markets, our EBIT margin of minus 4% was consistent with our historical results. EBITDA for the quarter totaled $123 million, a 27% increase for an EBITDA margin of 16.8% in line with the same period of 2022 despite higher fuel costs. For the first quarter, the net loss was $71 million, equivalent to a loss per ADS of $0.62. The cash flow of operating activities in the first quarter was $208 million. The cash flow used in investing was $109 million, and the cash flow used in financing activities was $110 million.

Volaris finished the quarter with a cash balance of $704 million, representing 23% of the last 12 months operating revenue. At the end of the first quarter, our net debt-to-EBITDA ratio was 3.8x compared to 3.9x in the fourth quarter of 2022. We expect to see it follow a downward trend and be less than or equal to 2.5x by the end of the year. It is important to note that most of our financial debt over 90% consists of leasing liabilities with fixed rates. We have taken steps to secure our financial position by entering into contracts for sale and leaseback agreements for aircraft deliveries until 2025.

Volaris does not face any immediate refinancing pressure and is well positioned to meet its financial obligations considering these agreements and over $500 million in financing for predelivery payments. When comparing Volaris to the most efficient cars in the world, we recognize an opportunity to take our cost efficiency to the next level by optimizing our fleet ownership component. To achieve this, we begin transitioning to Neos in 2016 and have made significant progress with the goal of 100% neo fleet over the next 5 years.

This transition will allow us to increase our seat per departure while delivering lower fuel bear and reducing emissions. Our growing number of new aircraft remains integral in mitigating costs, allowing us to keep expenses and fees lower than our peers. We expect NEOs to make up 60% of our fleet by year-end, and they accounted for 56% as of the first quarter end. In the first quarter of 2023, we consumed 3.2% fewer gallons per ASM than last year. Our fleet fuel efficiency is among the industry's best, reflecting our ongoing commitment to sustainability and operational excellence, and we expect this metric to continue improving as we move forward.

As of March 31, our fleet comprised 120 aircraft, up from 104 aircraft a year prior and 117 aircraft in December 2022. (inaudible) to 194 in the first quarter, a 3.4% increase year-over-year. Volaris' fleet had an average age of 5.4 years. As a result, we are maintaining our full year 2023 guidance, which comprises the following: ASM growth around 10% versus 2022, anticipating potential challenges such as aircraft manufacturer and engine availability. Total revenue to be in the range of $3.2 billion to $3.4 billion. CASM ex fuel is to be in the field of $0.46 to $0.48, EBITDA margin between 29% and 31%; CapEx of around $300 million, net of finance for delivery payments. And finally, the net debt-to-EBITDA ratio below or equal to 2.5x.

This outlook assumes an average foreign exchange rate between $19.25 to MXN 19.75 per dollar and an average economic fuel price between $3 to $3.10 per gallon. When reporting our second quarter, we will revisit our FX and fuel estimate of data.

Now I will turn the call over to Enrique for closing remarks.

Thank you very much, Jaime. Before we move on to Q&A, I want to cover ESG advancements that we have recently made. A task force on climate-related financial disclosure report. This closes information on the process followed to identify and manage climate-related risks and opportunities and on climate-related targets and metrics. Volaris after a thorough process was the first Latin American airline to publish this report. We now have a more precise way to help us mitigate climate-related risks. Meanwhile, during the annual shareholder meeting in the first quarter, a split of our Board audit and corporate practices committee was approved into separate committees and installed independent directors to lead them. We believe this reinforces our commitment to robust governance.

Finally, our annual integrated report will be published in June, highlighting the synergies between our financial and ESG strategies. As of March 31, we are 67% on the way to doubling revenue against 2019, and we expect to make important progress against our free cash flow and EBITDA goals by the end of the year in track with our triple gold presented at the Investors Meeting. As always, we remain disciplined on costs, prudent with capital deployment and focused on rewarding our customers and investors.

Thank you very much for listening. Operator, please open the line for questions.

(Operator Instructions) And today's first question comes from Stephen Trent with Citi.

I just have 1 or 2 for you-- I was wondering if you could refresh my memory. When you look at the domestic market, what sort of route overlap do you have with Viva Aerobus and Aeromexico?

So in the domestic market, we overlap with Viva on most of the trunk crudes. And then overall, we do have a lot of niche markets where we don't compete with Viva. So overall, on an ASM basis, our overlap would be in the domestic market, only about 60% to 70%.

And also when we're looking at the recent move you guys have made to Felipe Ángeles Airport, is there anything that you've learned about the operation from that airport, runways or passenger access or what have you that you think you can put the work to maybe guide you in optimizing Felipe Ángeles operations over the next year or 2?

Let me split this into parts, okay? From the operational perspective, that the airport is operating perfectly both runway, the (inaudible), terminals the TSA certified days there therefore valve for international operations. And so in general, that's going well. Our load factors are-- and we are working in raising deals in the woods on closing on at the performance of the routes itself.

They're still in ramp-up, and that's the way we see it, but they are very, very well in track versus the original (inaudible). So that's our ratio. From the airport operation itself and the access and everything else, the government evaluated in the first quarter another access, which was really important and so today, we have the 3 tons which that were needed to arrive to the airport emaciated and the government is working on 27 more accesses from those 27 almost 50% have been finished.

That's on one side. Increase on public transportation has happened, okay? Both doses and taxes and still not there yet. I mean, for example, Uber and that kind of stuff, the 3 taxes are still not operating imposed potential. And then finally, the train and the line of the train, which is being worked at the government again has offered to be finished by the end of September of this year.

And our next question today comes from Helane Becker with TD Cowen.

Just a question, Holger, do you know how many of your current passengers also subscribe to your v.pass program?

Yes. So there's a before and change in our product types. We had about high single digits of sales coming through the v.club in terms of sales sold on our website. And now post the change, we are now offering a completely unbundled 0 fare, which includes v.club membership. So if you want to access our lowest fares, you have to have a club membership. And that's clearly led to more v.club memberships sold and driving ancillary revenues as well.

And then my follow-up question is rollout is late, sorry, is related to how you're thinking about the guidance for the full year, given kind of the deficit for quarter. Can you maybe walk us through the cadence for the second quarter? And then maybe into the third.

Let me start something which is really important to name. And I think this is great to mention it. You cannot meet the strong fundamentals of the first quarter, okay? The first quarter had a nice drag increase and sellers went up from 44% to 47% as a percentage of total revenues. We operated with higher load factors and there's an improving fuel environment and (inaudible) in line with our investors' meeting tie lines. And then also on the revenue side, the strong peso helps, and it helps twice-- I mean, we have a better revenue when the strong vessel is here and revenue line is quite the size of the cost, which is a downside.

Having said that, I think it's very important to say we are entering into the best quarters of the year. I mean, remember, the first quarter for us, it's always a loss. And the reason is because it is our lowest seasonal quarter, okay? The second thing-- and now we are entering into the first quarters of the year. Assuming we still need to assume that we have a return of that in by the fourth quarter, which will allow us to grow in markets in which we have an increasing (inaudible) versus our U.S. peers, which allows us to compete much better there.

Then we have contested all of our part and we slow down so far. We could (technical difficulty) and I just want to invert to that. I mean, it not only a nice cost increase. It was a record casing, okay? And I think that's very important to underline. And I do that move to in the next few quarters. We will be boosting from lower debt and favorable effects and I think something which is really important is Central America, in general, is performing pretty well.

And our next question today comes from Duane Pfennigwerth with Evercore ISI.

First question with regard to CAT 1, the CAT 1 upgrade potential. I don't want to read too far into it, but it seems like the language in your slide deck is a little bit more pointed and a little bit more confident on the timing. Can you just talk a little bit of inside baseball on the process? What are you seeing that increases your confidence with respect to CAT 1?

So I will try to respond to whatever I said to Helane since you didn't hear well and then I'll answer the CAT 1. I said the fundamentals in the first quarter were really important and we're really good. We had a nice price increase great ancillaries, high load factor in going forward. It has is in line with our investors meeting-- comparison, which is benefiting especially the revenue line.

And then I said that we are entering the best quarters of the year and assuming that the return of CAT 1 by the end of the first quarter by the beginning of the fourth quarter, which will allow us to grow in markets, which we have -- where we have an increase in CASM at versus our U.S. peers. And then we continue seeing robust demand, and we are driving a better class ancillaries. So that's basically what I answered. I hope now you hear me better.

Speaking about Category 1, last week, the law was approved. And let me explain you why is so important. I think when you have (inaudible) in my experience is, there are 2 or 3 things that are fundamental for a holiday. And the first one is that you need to be in line with regulations and worldwide regulations. I mean you need to be processing the ICAO, regulations on a regular basis. You need to be updated in your aviation law in every turn.

The aviation law has to facilitate whatever is needed in order to accomplish the CAT 1, okay? So that's why this is so important.

From the 39 points that were raised by the FDA, there are 5 points that are related to the law, okay? So despite the government plans that they have basically overcome 35 or 34 of the points that the FAA raised these 5 points are fundamental for going forward. The second thing, which is very important is about budget process and sustain category and execute their plan of surveillance. And that's also something that has been approved.

And the third thing is to achieve compliance on everything else, which is basically a questionary, which is about 1,000 items that are in cloud there. Going out through that.

So the government has now finished the 34 publics, and we are missing the 5. Once we accomplish device, the government is allowed to request the outlets and the full (inaudible) which I'm expecting probably to be ready by nowhere than end of May, beginning of June, okay?

The law was approved in the lower house last week and this week, it is expected to be based on what we are hearing, it could be this cost tomorrow, and we could have a poll from the same age by probably the end of the day tomorrow. The next step is to publish the law in international asset, okay? And once that's approved. It's basically an effect. A lot of these points that are included in the observations are already being executed just it's not supported by the law. And it's also-- I don't think the government is going to have a problem with all 5 points until the audit is executed.

So the audit comes, it basically checks performance in terms of financial availability, the law accomplishments and then they check the rest of the optics. We think that the 39 points were so inclusive. And so they did cover so many things because it has more than 100 points that are so items that are included. But it is -- there's a big probability that the government might ask the (inaudible) in a very good level.

If they pass it, there's a 2-month process in terms of government bureaucratic processes in the U.S. So we will not hear from the U.S. raising the category probably in those 2 months at the end of probably July, beginning of August, and then we are basically acting category.

That starts then is we need to basically upload our routes, our new routes or the requests of the new routes and frequencies and itineraries and there being able to pop up in the optics, and that's going to take us about a month. And obviously, we need a couple of months to sell those routes. So we think we will be able to start operating some of this capacity at the end of the fourth quarter.

Our next question comes from Mike Linenberg with Deutsche Bank.

I want to go back to your characterization of bookings. You indicated that they were solid, and I think you specifically called out international, you mentioned U.S. transborder and Central. How about domestic? And what I'm getting to is, in your March release, you did talk about close-in demand in Mexico, maybe coming in below expectations. I'm not sure if that was the exact words that were used in the release. What happened in March? And are you seeing a continuation of that close-in demand weakness in April, May? If you could just elaborate.

The international markets are pretty healthy. We've been able to raise yields despite a 24% growth in ASMs in those markets. And that's true for Central America and the U.S. market that we operate in South America as well. In the domestic market, we see quite healthy booking curves in terms of volume. The volume is coming through, but at the extent of some lower last-minute yield in our trunk target. So in the are the 10 largest markets where there is more competition -- and we've been able to offset the lower base fares in the last minute bookings through higher ancillaries. And that has kind of compensated for that and you've seen that the trade increase in the first quarter, given that push.

So the challenge we are seeing right now is in the yields on the last-minute bookings, but we are still seeing strong domestic volumes in the market as a whole. And you've seen that in our traffic release as well in the first quarter.

And then just on the legislation that's before the Senate as it relates to what needs to be approved to kind of move CAT 1 along. That legislation, I believe, also allows, I guess, for government ownership of airlines as well as government.

I'm curious, I mean, I'm not even sure how much you can even say on this, Enrique. But vertically integrated competitors can be powerful. And in this case, this is one that's supported by the government. Is this a real risk? I mean should we be concerned? That's kind of what we hear from investors. And so again, I'm not sure what you can even say on it since the legislation is pending, but it does seem like it gives the government a powerful, say and influence over the industry from a competitive perspective.

So Mike, look, I think right now is total speculation, I mean, the law is still not approved, but we might be approved in a couple of days. But I mean, we don't know if the government is going to create let me say it. I mean, is it going to be a low cost. This is going to be a wide-body aircraft. Going to rate where-- I mean, there's basically no information. And we have heard from bearable and for Boeing that we will request the aircraft, and they didn't know what they want. That's in a nutshell that we know today. So other than that, it's speculating. And I would not like to speculate on that anything.

But having said that, Michael, I mean, I just want to remind you, I mean, Volaris is one of the lowest cost operators in the world and one of the most effective operators in the world. And we have always been open to competition as long as there are equal competitive conditions offered to all market participants. And one of the things that was included in the law, is that they have to be rolled and manage in the same way the concessions are being managed, et cetera. We do have an end of our concessions they don't have an end on a there do. So that's pretty much what I know and what I can answer right now.

Enrique, if you just let me add, I mean, I would just make the point, not just you, but if I include you, Viva and Aeromexico, it would seem like it would be very difficult for a government to use the people's money to make any money. In fact, it would seem like it would be a very high probability that it would be a loss-making proposition because you're up against some of the 3 strongest competitors in the Americas. So anyway, that's just my thoughts on it.

I would probably agree with you, and then this is a market which is very well served and very well-- with very good airlines. But I mean that's their idea, and I don't want to speculate on that. And I don't think anyone should speculate until we really know what is going on at (inaudible). I mean launching the (inaudible) not something that happens from today to tomorrow. So I think we need to focus on our numbers for the rest of the year. And I just want to reassure that we are confirming our forecasts, and we continue being solid in what we proposed for the year. And I think that's where the market should be focusing right now.

And our next question today comes from Rogério Araújo with Bank of America.

I have a couple here. The first one on the guidance. First thing, how was the first Q '23 EBITDA margin versus company's expectation when-- in February. And also, it seems that U.S. goes below the implied range, Mexican peso as well. So does the company expect to pass through these lower cost to consumers or margins could surprise on the upside? That's the first one.

The second, just a confirmation. The Cabotage was removed from the bill that was approved in the lower house. Is that correct? That's it.

I think the numbers of the first (inaudible) are quite aligned with what we budgeted last year and now sort prices, and it will help from the FX only on the (inaudible) and the effect on the cash forecasted and monitor for the year. And jet fuel prices are a little higher than we expected for the quarter and compared to the first Q of 2022, but the numbers are aligned with budget.

I think from the fuel perspective, Rogério, you need to consider that we are leaving kind of exactly different years than what we had a year before. Last year, we have February, March with kind of normal level of fuel levels and then March raising. And going forward, the question was a raison field. The difference this year is we have high January and February numbers in March number, which is far lower. And then the forecast for the rest of the year remains lower.

I think that's important to go -- it's important TRASM was a record level in the first quarter. And I think that's something you really need to consider. Then Cabotage was taken out of the law. So Cabotage remains only for local operators.

Thank you. And ladies and gentlemen, this concludes today's Question-and-Answer Session. I would like to invite Mr. Beltranena to proceed with his closing remarks. Please go ahead, sir.

I just want to thank you very much, everybody, for listening, and I want to thank you our family of ambassadors, the Board of Directors, investors, the bankers, the lessors and suppliers for their commitment and support during another strong quarter. I look forward to addressing you all again for the next one. And thank you very much, and operator, please open the line for questions.

Thank you very much for your participation, and have a nice day.