Aeromexico Earnings Call: Record Margins, Cautious Outlook

Grupo Aeromexico, S.A.B. de C.V. Unsponsored ADR ((AERO)) has held its Q4 earnings call. Read on for the main highlights of the call.

Aeromexico’s latest earnings call painted a largely upbeat picture, as management highlighted record profitability, strong cash generation and robust liquidity, even while acknowledging FX headwinds, higher unit costs and regulatory constraints. The tone balanced confidence in the carrier’s premium strategy and fleet investments with realism on margin pressures and operational bottlenecks.

Record Adjusted EBITDAR and Margin Peaks

Aeromexico reported record adjusted EBITDAR of $1.7 billion for 2025, delivering a 31% margin, the highest in its history and underlining the strength of its business model. Fourth quarter performance was even more striking, with adjusted EBITDAR of $502 million and a 35% margin, also a company record even after stripping out TechOps and IPO effects.

Operating Income Near Historic Highs

Operating income reached $928 million for the year, translating into a 17% margin and marking the second strongest annual result on record for the airline. In the fourth quarter, operating income of $303 million and a 21% margin confirmed that profitability remained solid even when adjusting for one-offs, with full-year underlying margins near 16%.

Revenue Growth and Q4 Record Passenger Metrics

Total 2025 revenue rose 2% versus 2024 when extraordinary items are excluded, reaching $5.4 billion and underscoring stable topline growth despite earlier demand softness. Fourth quarter revenue of $1.4 billion grew 3% year over year, with record Q4 passenger revenue and unit revenue, up 4.3% and 6.2% respectively, signaling a strong finish to the year.

Cash Generation Strengthens Balance Sheet

The airline generated $913 million of operating cash flow in 2025, giving management flexibility to reduce financial debt by $156 million and keep leverage in check. Adjusted net debt to EBITDA stood at 1.8 times, while cash and equivalents of $1.0 billion plus a $200 million undrawn revolver lifted total liquidity to about $1.2 billion, roughly 23% of trailing revenues.

Fleet Renewal Supports Passenger Growth

Aeromexico carried around 25 million passengers during 2025 and ended the year with 165 operating aircraft, a net addition of 17 planes versus the prior year. Management framed the expanding and modernizing fleet as a driver of better reliability and future operating leverage, creating room to capture demand when constraints ease.

Premium and Loyalty Momentum Accelerates

Commercial strategy remains anchored in premium and loyalty, with premium revenue now accounting for roughly 42% of total sales, about 17 percentage points above pre-pandemic levels. Loyalty participation reached a record 37% in the fourth quarter, and premium unit revenue growth outpaced main cabin by about six points, reinforcing the shift toward higher-yield customers.

Operational Reliability and Industry Recognition

Aeromexico emphasized its operational performance, noting it was named the world’s most on-time airline by Cirium for 2025, a key selling point for corporate and premium travelers. Additional accolades included an APEX 5-star Global Airline rating for the seventh straight year, APEX North America’s Best Global Airline and a top-tier IATA safety assessment, enhancing brand credibility.

Capital Allocation and Shareholder Returns

Management pointed to disciplined capital deployment, returning over $200 million to shareholders in 2025 and bringing distributions since late 2023 to about $1.3 billion. At the same time, the company is funding a roughly $500 million CapEx program focused on fleet modernization, app upgrades and customer experience, seeking a balance between growth and investor payouts.

FX and Fuel Assumptions Underpinning Strategy

To add transparency, the company detailed the macro assumptions behind its plans, including an average exchange rate of MXN 18.3 per U.S. dollar and Brent at about $69 per barrel with a crack spread near $25. These benchmarks help investors gauge sensitivity to currency and fuel swings, which remain critical drivers of airline earnings.

Passenger Revenue and Unit Revenue Decline for 2025

Despite the strong fourth quarter, full-year passenger revenue declined 4.4% while passenger unit revenue fell 4.9%, reflecting a tougher environment earlier in the year. Management cited currency, economic and geopolitical headwinds that dampened demand in domestic border cities and the U.S. market, forcing tactical adjustments to capacity.

CASM Ex-Fuel Edge Higher on Costs

Cost per available seat mile excluding fuel increased 1.8% year over year, highlighting structural and one-off cost pressures that offset some revenue gains. The increase was driven by higher labor expenses from renegotiated collective bargaining agreements, added depreciation from new aircraft, IPO-related charges and the impact of a stronger peso on local costs.

Regulatory Limits on U.S. Route Growth

Regulatory disputes over open skies, cargo and airport issues in the Mexico City metropolitan area are constraining Aeromexico’s ability to add U.S. routes from its key hub. Management warned that if these restrictions persist beyond 2026 they could hinder growth from Mexico City, though the broader network still has room for redeployment.

Peso Appreciation Squeezes Reported Margins

The appreciation of the Mexican peso has raised peso-denominated expenses and created a mathematical drag on dollar-based margins, even as underlying EBITDAR and EBIT expand. Executives stressed that FX movements can temporarily compress reported margin percentages, complicating comparative analysis despite solid operational performance.

Volatility from One-Time Items

Fourth quarter results were boosted by about $71 million in profit from the TechOps sale and burdened by IPO-related expenses, adding noise to headline figures. Management encouraged investors to look at adjusted numbers, which show strong but somewhat lower profitability, and noted that such nonrecurring items will continue to cause quarter-to-quarter volatility.

Rightsizing Capacity After Early Demand Weakness

In early 2025, Aeromexico proactively rightsized capacity in response to weaker demand in some domestic border cities and the U.S., which weighed on first-half performance. As conditions improved into the second half and fourth quarter, the airline redeployed capacity more profitably, highlighting a disciplined approach to network management.

Crew and Utilization Constraints Limit Upside

Management acknowledged that limited crew availability and below-peak narrow-body utilization, currently around nine hours per day versus historical levels of about ten, are constraining growth. These bottlenecks slow the pace of bringing idle capacity back into the system, as the company prefers to avoid stressing operations and risking reliability.

Margin Pressure Despite Strong 2026 Revenue Outlook

Even with guidance calling for mid-to-high single-digit revenue growth in 2026, management is signaling largely stable rather than expanding margins. The company cited pressures from labor, rising depreciation and FX effects, noting that while absolute profits should grow, percentage margins may not widen meaningfully in the near term.

Competitive Uncertainty in the Domestic Market

Possible consolidation via a Viva and Volaris merger and any related regulatory remedies add another layer of uncertainty to the Mexican domestic market. Aeromexico sees potential for capacity rationalization that could support pricing, but timing, regulatory responses and the ultimate impact on competition remain unclear.

2026 Outlook and Guidance

For 2026, Aeromexico is guiding to modest yet profitable growth, with capacity up 3% to 5% and revenue rising 7.5% to 9.5%, implying continued yield and mix benefits. Adjusted EBITDAR margins are projected at 28.5% to 30.5% and operating margins at 15% to 17%, while first quarter revenue is expected to grow 10% to 12% year on year with solid double-digit EBIT growth.

Aeromexico’s earnings call underscored a resilient franchise balancing record profitability, premium-led revenue strength and solid liquidity against FX, cost and regulatory headwinds. For investors, the key takeaway is a carrier positioned for measured, profitable growth in 2026, with disciplined capacity deployment and capital allocation anchoring its strategy despite near-term margin constraints.