Volaris Aviation's (VLRS) CEO Enrique Beltranena on Q4 2015 Results - Earnings Call Transcript

| About: Volaris Aviation (VLRS)

Volaris Aviation (NYSE:VLRS)

Q4 2015 Earnings Conference Call

February 22, 2016 11:00 ET

Executives

Andrés Pliego - IR

Enrique Beltranena - CEO

Fernando Suarez - CFO

Holger Blankenstein - CCO

Analysts

Duane Pfennigwerth - Evercore ISI

Catherine O'Brien - Deutsche Bank

Renato Salomone - Itaù

Stephen Trent - Citi

Rogerio Araujo - UBS

Helane Becker - Cowen & Company

Leandro Fontanesi - Bradesco

Operator

Good morning and welcome to Volaris' Fourth Quarter 2015 Conference Call. All lines have been placed on mute to prevent any background noise. After this presentation, we will open the floor for questions. At that time instructions will be given as to the procedure to follow if you would like to ask a question. Thank you.

It is now my pleasure to turn the call over to Andrés Pliego of Volaris. Sir, you may begin.

Andrés Pliego

Thank you, operator, good morning everyone and thank you for joining us today. With me today are Enrique Beltranena, CEO; Fernando Suarez, CFO; and Holger Blankenstein, CCO. They will be discussing our fourth quarter and full year 2015 results published today. Afterwards, they will take your questions. Please note that this call is for investors and analysts only.

Before we begin please let me remind everyone that some of the statements that we will make on this call would constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements are subject to a number of factors that could cause the company's financial results to differ materially from expectations for reasons described in 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 our CEO, Enrique Beltranena.

Enrique Beltranena

Thank you Andrés and good morning to everyone. Let me start with some of the highlights of our financial performance and then give you guys more color on the market environment. The fourth quarter of 2015 continued demonstrated a strong demand environment. We have actively stimulated with our low pacers and our boss switching campaign while diversifying our network and growing our non-ticket revenues. This has resulted in strong profitability for the quarter and the full year, as well as continued to strengthen our balance sheet.

For the fourth quarter, our adjusted EBITDAR and operating profit expanded by 52% and 73% versus 2014, respectively. For the full year, our adjusted EBITDAR more than doubled. Volaris as an emerging market airline is reaping the benefits of the Mexican air travel market growth. During 2015, we saw an improved macroeconomic environment in Mexico. More disposable income for the Mexican consumer is good for us and strong foreign remittances also support our visiting friends and relative market.

Consumer demand was healthy as seen in the retail sector, and the inflation environment was stable despite the exchange rate volatility. All of these macroeconomic backdrop supported our business for the year. The total Mexican passenger volume for the year grew 12% in line with high historical GDP multiplier. Not all GDP in Mexico is estimated to have grown between 3% to 4% in the year, driving such passenger volume growth. This GDP multiplier is common among emerging and underpenetrated air travel markets. Over a third of the domestic market volume growth in Mexico for the year is attributed to Volaris’ market penetration. We operated our diversified point-to-point network structure in 2015 at a sustained 82% low factor. Producing such growth is a function of an effectively executed bulb-switching campaign, a point-to-point network, a low-pay fare approach, complimented by a strong ancillary revenue strategy.

We increased capacity in the fourth quarter in order to respond to the solid demand growth. Our network-wide available seat miles grew 25% with a skew towards international markets which was 35% higher compared with same quarter last year. At the beginning of 2015 we started conservative with our growth expectations, given the challenging market conditions prevalent at that time. I suppose the Mexican economy and demand to the U.S. remains strong during the year we continuously, cautiously manage capacity in light of the strong market demand through our fleet flexibility. Our core market is the visiting friends and relative customer which gave us the unique opportunity to increase utilization through Red Eye flights from 12.4 hours in 2014 to 12.7 hours in 2015. Our passenger volume grew 22% for the full year with almost 12 million passengers transport.

During 2015 we operated 22 new routes which are performing as expected and in line with our point-to-point expansion plan. We considered this a healthy capacity growth since it is mostly driven by adding frequencies of gauging and connecting existing airports which has driven higher utilization for the fleet. We're focused on improving our total unit revenue and achieving this by offering low-base fares, stimulating demand and growing non-ticket revenues. Low factor for the quarter remains stable at 83% while average base fare only increased 1% and non-ticket revenue per passenger increased 14% year-over-year.

Fee [ph] for the quarter increased 3%, unbundling continued being a key component of our business model. For this reason, in the long-term we are focused on building total yield rather than base fares yield. We also achieved efficiencies in our unit cost during the quarter which in dollar terms decreased 3% year-over-year to 4.9 dollar cents excluding fuel. Thank you - thanks to our ultra-low cost model, Volaris has grown profitable and generating shareholder buy.

With respect to our fleet, we closed the year with 56 aircrafts including 18 A319s, 36 A320s, and 2 A321s. We operated and fully retrofitted A320 fleet with the highest intensity supporting our higher couch strategy in particular at the Mexico City Airport. And Volaris has now one of the youngest fleets in the Americas with an average age of 4.6 years. Summing up, all of the financial and operating results could not have been achieved without our most important asset which is our human in capital, our employees are ambassadors as we call each other, executed seemingly during the year and we are very thankful for it.

Now, let me pass it over to Fernando who will review in further details the financial performance of the peer. So Fernando, please go ahead.

Fernando Suarez

Thank you, Enrique. Now, let me expound on our financial performance during the fourth quarter. As noted, passenger demand in the quarter was strong and Volaris responded by adding capacity our market demand required. Operating revenues for the fourth quarter reached 5.1 billion pesos, a 29% increase compared to the same period last year.

During the fourth quarter, non-ticket revenues 1.2 billion pesos, an increase of 42% year-over-year. U.S. dollar denominated revenues represented approximately 35% of total operating revenues for the quarter. This mix in our dollar denominated revenues continues to construct a better natural hedge against exchange rate volatility for our business. Again, our best hedge against exchange rate volatility is to further diversify our international network. On the cost side, CASM reached 115 peso cents, a 1.4% decrease during the quarter, mainly driven by an effect of 23% reduction in fuel prices, helping to offset the exchange rate devaluation of 21%. We also achieved further labor productivity with 58 employees per aircraft. CASM ex-fuel for the quarter expressed in dollar terms was $0.049, in line with best in class low-cost carriers worldwide.

We continue to dilute our fixed costs as a result of growing capacity and greater economies of scale together with further fleet upgauge, a younger fleet, sharply equipped aircraft and better lease terms. For the quarter, fuel costs represented 27% of total operating expenses, 10 percentage points lower than in the fourth quarter 2014. The total average blended economic fuel cost per gallon for the fourth quarter was $1.52 per gallon. We have remained active in our fuel-risk management program. For the fourth quarter, we hedged 50% of our consumption through jet fuel call options at an average price of $2.07 per gallon.

Looking forward for calendar 2016 and 2017, we have purchase call options to hedge approximately 60% and 45% of the expected jet fuel consumption at an average price of $1.97 and $1.52 per gallon, respectively. Adjusted EBITDAR in the fourth quarter was 1.9 billion pesos representing an adjusted EBITDAR margin of 37% which is six percentage points higher than last year. Operating profit reached 736 million pesos for the quarter. Operating margin was 14%, up four percentage points compared to the fourth quarter of 2014. Below the operating line, we booked an average gain of 178 million pesos in the quarter resulting from a depreciation of the Mexican Peso on our balance sheets net monetary US dollar as positioned.

Net income per quarter was 638 million pesos representing a net margin of 13%. Earnings per share were 0.63 pesos cents for Series A shares and $0.037 cents per ADS. During the quarter we generated strong cash flow with 930 million pesos, cash flow from operating activities resulting in a net increase of 750 million pesos in total net cash. Our solid balance sheet and liquidity position has provided us financial flexibility to continue with our strong growth and a very comfortable financing profile. As of December 31, we recorded 5.2 billion pesos in unrestricted cash representing 28% of the last twelve months operating revenues. We maintained a negative net debt or a net cash position of 3.6 billion pesos.

During the quarter Volaris incurred capital expenditures of 356 million pesos. Our pre-delivery payment requirements for the remainder of the year and next year are fully financed with our revolving PDP line of credit. All 2016 aircraft deliveries are also financed by way of executed sale lease back agreements. We have also obtained PDP financing for our 2017 and 2018 Airbus new engine option or new order deliveries. Bottom line, the company produced a full-year pre-tax adjusted return-on-invested capital or ROIT of 22%.

Volaris remains cautious about capacity discipline. As a result, we will place capacity accordingly while managing utilization. Based on the current trends, we could expect to continue operating in a strong demand market environment in 2016 similar to what we saw in 2015. On capacity guidance, for the full year we have a contractual seat growth of 18% which may result in a similar ASM growth to the one we achieved in 2015.

Capacity growth in the first quarter will be higher because of the Holy and Easter weeks which this year falls fully in the first quarter and a low comparative base year-over-year, most of it from catchup growth from capacity additions placed in the second half of 2015. We expect such first quarter capacity to be approximately between 25% and 28% growth in ASMs with an even breakdown between domestic and international.

On margin guidance for the first quarter, we note that the current adjusted EBITDAR margin is free consensus based on the same analysis that we follow is up 33% which we feel confident to deliver.

Now, I'll ask Enrique to make his closing remarks before we open the line to questions.

Enrique Beltranena

Thank you, Fernando. I would like to conclude by stating that we remain focused on the strong execution of our strategy in order to generate shareholder value. I wish to thank all of Volaris' ambassadors who contribute daily to the performance of the company. I think it's also important to say that I would like to thank everybody that invested in the company last year. And before moving on the Q&A session I would like to personally invite you all to our Investors' Day in New York City on March 15 at the New York Stock Exchange. We hope that you have already received the invitation, but if not please reach out to Andrés Pliego and Diana for the details. We're planning a productive event where you will hear from the management crew more color on our operations.

Thank you very much for taking the time to be with us today. Thanks for all your support during 2015, and we would like now to proceed on to your questions. Operator please open the line for them.

Question-and-Answer Session

Operator

Thank you. At this time, we will open the floor for your questions. [Operator Instruction] Our first question will come from Duane Pfennigwerth from Evercore ISI.

Duane Pfennigwerth

Hi guys, good morning. Thanks for the time.

Enrique Beltranena

Hi, Duane. How are you doing?

Duane Pfennigwerth

Great. Thank you. I'm wondering if you could comment on what drove the increase in ancillary revenue from the third quarter to the fourth quarter, and as we think about 2016, what initiative that you have on the table that have not fully contributed or not fully run rate in that fourth quarter level?

Holger Blankenstein

Hey Duane, good morning. This is Holger. In the fourth quarter we were particularly successful in dynamic key pricing some of the products related to package in the winter season, and we also launched a couple of new products in the quarter such as the fast pass, moving to security and rental car sales on board. We see continued demand stimulation as we unbundle our product and we also see that the ancillary strategy is providing economic incentives to glide lower cost behavior.

With regards to your question of what's next, ancillary revenue continues to be a cornerstone of our commercial strategy. And as we move into 2016 we have a broad map of new initiatives going forward and those include new products, improving some of the existing products and also completing as the way we distribute ancillaries throughout the travel value chain. Just as a reminder for everybody, we're focusing ancillary growth in three avenues, one is to continue the dynamic pricing, applying prudent revenue management techniques to ancillary items. The second is to improve the presence of our ancillary products by capturing a larger portion of our total travel budget, and thirdly offering more products. Now quite a substantial pipeline of products in development that are going to be rolled out during 2016.

Duane Pfennigwerth

That's great Holger, I appreciate that. How would you characterize the competitive environment now versus, maybe, a quarter or two ago. And I wonder if you could separate the commentary between what you're seeing in the domestic market versus what you're seeing internationally both from Mexican carriers as well as U.S. carriers.

Holger Blankenstein

Sure, Duane. Let me start out by saying that the demand for air service throughout the year both in the domestic and the international market have been quite strong, and Volaris has been in the strategy of diversifying network and we now have more than 143 route in operation. Many of our markets, especially in the U.S. market are demanding more capacity. As we are seeing that our boss switching strategy is paying off and our ultra-low cost model of unbundling fares is increasingly successful. So we've been adding capacity as you saw in our traffic reports, mainly to the U.S. markets which have been very resilient because we have a very strong DFR core customer segment. That is very resilient to exchange rate changes. In the domestic market we also see relatively strong demand especially due to the mass stimulation in some of the beach markets as demand is shifting to domestic beaches, as the exchange rate, as the U.S become a little bit more expensive for some of the Mexican consumers.

Duane Pfennigwerth

I appreciate that commentary on demand. I guess if you could add just as a follow up any color you have on the competitive environment and if you've seen any change there in either international or domestic, and thanks for taking the questions.

Holger Blankenstein

Duane, the competitive environment is relatively stable. Right now we're not seeing any major changes in the competitors' perspective.

Duane Pfennigwerth

Thank you.

Operator

Thank you. Our next question comes from Michael Linenberg from Deutsche Bank.

Catherine O'Brien

Good morning gentlemen. This is actually Catherine O'Brien filling in for Mike. I just want to know [Cross Talk]. Good morning guys. I just want to know, have you noticed changes in demand and if your market with economies impacted by the oil industry either in Mexico or in Texas, and then maybe this has an answer to that question, if you've noticed any change in demand the way is with Zika.

Holger Blankenstein

Thank you for the question. The exchange rate volatility has not affected any of our markets. We see a lot of resiliency in our markets, and that's because we are very much focused on our core VFR market. As you see, one of our main indicators to measure VFR demand is the growth in remittances from the U.S. to Mexico, and that indicator has been very, very resilient; very, very strong over the last couple of months, and that is reflected in strong demand for our VFR core market. The oil price decline has not had an impact on our markets due we're very much focused on the West Coast of the U.S. We have only two routes - three routes in Texas, and also this VFR demand to Guadalajara. So no, we have not seen any impact of the oil price decline and the Texas economy.

To your second question, to the Zika, again we have not seen any effect of the Zika virus to our demand. Volaris is currently operating flights to and from Central America as normal and in alignment with relevant hygiene and safety protocol issued by the corresponding aviation authorities. Volaris maintains constant communication with authorities to be sure we take the appropriate precautionary measures, and no, we have not seen any effect on demand.

Catherine O'Brien

That would be great. And then if I could just maybe ask, kind of a follow up to Duane's question. Would you say that right now your ancillary revenue per passenger growth is being driven more by improvements in your dynamic pricing capabilities or the introduction of new products? And then regarding those new products, have there been any that stood out performing better than expected and perhaps giving you new ideas to the pipeline?

Holger Blankenstein

Well, we have those three avenues of growth, its products, its pricing and its presence. I would say in the fourth quarter it was probably more driven by dynamic pricing...

Enrique Beltranena

Because of the high season...

Holger Blankenstein

Because of the high season, because of strong extra baggage sales in the high season.

Catherine O'Brien

Right

Holger Blankenstein

Which we've been able to take advantage of very nicely in this high season. Going forward, we are going to be focusing more on new products. We have a long list of ideas that we are going to try doing 2016. And for products that have stood out, I would like to mention the baggage in the high season clearly and very successful onboard sales. We've constantly added products to our onboard menu and that has had a nice impact on ancillary revenues.

Catherine O'Brien

Thank you for the time.

Holger Blankenstein

Thank you.

Operator

Thank you. Our next question will come Renato Salomone from Itaù. Please go ahead.

Renato Salomone

Hello, thanks for taking my question. Holger mentioned that core VFR passenger is more resilient to exchange rates and that has been key. We can clearly see that through the results. But if you guys could elaborate more on that as we see further volatility in the first quarter. How could that affect new boss switching? So, I understand that existing VFR passengers, they are more resilient and here the remittances help a lot. But could that be a problem for further, for future bus switching?

Holger Blankenstein

Yes Renato, maybe, I just want to remind you that most of the boss switching that we do is within Mexico. Okay? In the Northern part of the country. So that's pretty much driven by Peso kind of traffic. Okay? Or specified kind of fares. Okay? That's the first part. The second part which I think it's important to consider in the further boss switching is a lot of it is happening much more because of capacity added in adding point-to-point connections which is part of the network strategy and continue being the most important part of the network strategy. So, that part I don't think is going to be a factor. I mean, it's a matter of giving them, offering them product and that offer putting it at the right price, and that gets the revenues. Okay? So I don't think the further expansion or the further switching of it will be affected. It's going to be much more the fact of having capacity.

Renato Salomone

Perfect. And also to Fernando, on the cost side besides the fact that the positive impact that we see on the cost side from capacity growth. Can you show us some initiatives that you have to offset the pressure from on dollar denominated costs?

Fernando Suárez

Well of course, Renato. Obviously we have an important organic growth seat-wise that helps dilute fixed cost substantially with a combination of new aircraft and more seats per aircraft as well. So on a unit cost basis that's a virtues effect there. On the other hand we do get pressure because of exchange rate on certain cost side such as rentals, part of maintenance and now more and more traffic cost derived from our increasing U.S. operation. So we focus on maintaining the cost control across the company. We have a wide set of initiatives to control cost in particular traffic costs, what we can have more influence upon and be more active upon because all the cost items are much more given. For example rentals and fuel consumption. So there's a lot of focus on cost initiatives on the traffic side and as well back to the fuel cost, as we continue to obtain more sharklet equipped aircraft and we up gauge from A319s to A320s and even into A321s. We should also see improvements there on the register, and fuel consumption per ESM.

Renato Salomone

Great. Thank you very much.

Operator

Thank you. Our next question comes from Stephen Trent from Citi.

Stephen Trent

Hi, good morning gentleman, and thank you very much for taking my question. If I may start, once again, with a follow up to Duane and the lady from Mike Linenberg's team. I apologize I don't remember the name. When we think about this adjustment to the bilateral agreement to the U.S. and Mexico, have you seen any action at all from carriers on either side of the border wanting to establish new flights or has this piece of the story been pretty quiet and pretty stable? As I understand it's only five specific U.S. airports that are going to be affected.

Holger Blankenstein

Yes, Stephen. Well the bilateral, the new bilateral agreement has not been ratified by the congress yet, so no action has been, by the senate, the Mexican senate yet. So no additional routes have been act for by any of the competitors and they cannot be yet until the senate ratified that agreement. Having said that, as you mentioned only some routes from Mexico City are going to be affected for us, and we are evaluating whether to launch service in some of those markets that are hardly restricted by the bilateral. But you will see more action once the senate has ratified that agreement.

Stephen Trent

Okay, very helpful Holger. And just one other question if I may, looking at the carrier's very strong ability in terms of operating cash flow. As is just of your thinking, over medium to long term with respect to eventually they're clearing cash dividend?

Fernando Suárez

Stephen, we'd rather invest our cash and continue to grow the business by way of opening new routes and bringing new aircrafts. We think it is a better return for our shareholders at this stage than paying a dividend. So we're more focused on growth.

Stephen Trent

Got it. Thanks Fernando. I'll let someone else ask a question. I appreciate the time guys.

Fernando Suárez

Thank you, Stephen.

Operator

Thank you. Our next question comes from Rogerio Araujo from UBS.

Rogerio Araujo

Hello, good morning gentleman. Thanks for the question. If you could confirm just Volaris net seat addition expected for 2016. I think I've heard you saying something as we grow in line with 2015, if it's going to be close to 20%, if this number is right. And also, how capacity constraints in Mexico City Airport could represent a bottleneck for airline as growth in 2016, and also which airports you expect to grow more because of this bottleneck. That's my question. Thank you.

Enrique Beltranena

Let me take the first question, Rogerio. In terms of growth, aircraft deliveries into our fleet in 2016, we have a total of 18 aircraft entering the fleet. However we do have 6 pre-deliveries, so, it's a net of 12 aircrafts. In terms of Mexico City Airport, so far, I mean, we saw an increment of capacity in December and January at the Mexico City operation. And obviously we saw also a growth of passengers. We're expecting that start stopping, okay. And we have assumed a growth in Mexico City which is only mainly as a result of larger gouge, okay. We only less than 40% of our ASMs in Mexico City and a lot of our growth has come from our point-to-point and connecting the dots rather than doing Mexico City which is part of the advantage of Volaris.

Holger Blankenstein

Just to remind everybody that Volaris is very well positioned to, for the upgauge in Mexico City. We have already incorporated two A321s which are operating high density markets for Mexico City currently, and we will incorporate an additional eight A321s in 2016 which will support our growth to up gauging from Mexico City.

Rogerio Araujo

Okay, that's great. And if you could just tell which airports in Mexico do you expect to grow more your roots, of course if you can say this, it would be great. Thank you.

Holger Blankenstein

Of course, we continue to be very much focused on our four cities which is Tijuana, Guadalajara, Cancún, Monterey and Mexico City. And as Enrique mentioned, our strategy is to join existing airport as we operate to new routes that have no competition or only bus competition, and to increase frequencies in existing routes.

Enrique Beltranena

And Rogerio, to compliment your first question on I think deliveries and checks returns, that should be very much in line with the 18% seat growth that we have contractually. And that is our current thinking in terms of ASM capacity as well for the full year.

Rogerio Araujo

Okay then. That's perfect. Thank you very much. Have a nice day.

Enrique Beltranena

Thanks, Rogerio.

Operator

[Operator Instructions] Our next question will come Helane Becker from Cowen & Company.

Helane Becker

Thanks, Operator. Hi, gentlemen. Thank you for squeezing my question in. Sir, I have two questions. The first question is with respect to the financing you're getting on the new aircraft. Can you just talk about how that compares to the financing you were getting maybe a year ago and then maybe prior to your IPO? Are you seeing lease rates come down or just some words of wisdom on that would be helpful?

Holger Blankenstein

Yes, Helane. We have seen an improvement in our financing terms. Bear in mind that at this stage we have only done operating leases, we have not purchased any aircraft or owner, under ownership. And in that sense, yes, we have seen leased terms and lease rate factors in particular go down, and in general as Volaris has continued to improve its credit matrix and credit worthiness post IPO. We've seen in general better terms of condition under such leases.

Helane Becker

Okay. And then my other question is with respect to your thoughts about expansion sales from Mexico and North to the United States. Are you still focused mostly on Northern expansion? And I'm hearing that airport charges in Latin America are kind of increasing and maybe getting a little expensive, and I'm just kind of wondering what you're seeing and what your thoughts are. Thanks.

Holger Blankenstein

I'll take the first part of your question and pass it over to Fernando on the airport costs. Regarding to Central America and the Caribbean, currently it continues to be a small part of our capacity. As you might recall Volaris has routes to Guatemala, Costa Rica and Puerto Rico, and we are evaluating some capacity additions to Central America. However, our main focus remains our core VFR franchise which we plan to expand in 2016 to the U.S.

Fernando Suarez

And on airport cost in Central America, Helane, we're currently only operating in Guatemala, San Jose, Costa Rica. And in that sense no major change in terms of airport cost that we are foreseeing at this stage.

Helane Becker

Okay, great. Thanks. See you next month.

Fernando Suarez

Thank you.

Holger Blankenstein

Thank you, Helane.

Operator

[Operator Instructions] At this time we have no further questions. I'd like to turn the call - we do actually have another question coming from Leandro Fontanesi from Bradesco. Please go ahead.

Leandro Fontanesi

Hi, thank you. So just coming back to the matter regarding your cash position. So you mentioned that you do see space for additional growth, but I mean today you have almost 30% of your last 12 months revenues, so you probably have some excess cash that you could use. So what's preventing you from growing more right now, so just to understand?

Holger Blankenstein

Yes, in that sense you do know well that we're in 28% LTM revenue cash position. It has to do with having an orderly growth. We are growing 18% seats for this year. We'd expect to be growing in that level. So we want to also be very cautious about how we go about growth, we cannot just accelerate growth indiscriminately. We want it to be profitable growth and that's why we're being very cautious about it.

Enrique Beltranena

I think Leandro; you're not, it is very important to consider the rate that we've been growing in the past years. I mean, this company growing 20, 20 something percent year-over-year, it becomes exponentially, okay. And the bigger we are that ratio should go down just because as a percent from the base it is a growth, it is an important growth. Growing 18% this year over the growth that we have last year, it's a humongous growth, okay. From operational perspective, we need to manage the business okay.

Leandro Fontanesi

Okay, and for example do you consider acquisitions in the sector?

Enrique Beltranena

As we always said, we are driving the business based on our capacity on our growth. But if there's some opportunity, we're open to take a look to it.

Leandro Fontanesi

Okay, and just last one. So regarding your fuel hedges, so if I'm not mistaken we have around 60% of your 2016 consumption have, and we haven't seen oil prices falling a lot. So do you consider changing this going forward, meaning that would you considering hedging less over fuel exposure?

Enrique Beltranena

No, we maintain the same philosophy on risk management with respect to fuel. We continue to hedge at around 50% in order to, we have hedged 50% of calendar 2016 and have already hedged 45% of calendar 2017. The difference here is that we're getting a better price. As fuel prices go down, we are able to lock in more attractive levels. But we continue with the same fuel hedge.

Leandro Fontanesi

Okay, thank you.

Operator

Thank you very much.

Enrique Beltranena

Okay, thank you very much everybody. It was a great pleasure to have you on the line and hear about your questions. I hope I see you guys on March 15 in New York. Thank you very much

Operator

Thank you ladies and gentlemen. This concludes today's teleconference. You may now disconnect.

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