← Back to AERO filing summaryOriginal filing text · Part I
Item 5 — Management's Discussion and Analysis
Grupo Aeromexico, S.a.b. De C.v. · 20-F · FY 2025 · Period ended Dec 31, 2025
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A. OPERATING RESULTS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in “Item 3. Key Information—D. Risk Factors.” Actual results could differ materially from those contained in any forward-looking statements.
The following tables summarize certain of our consolidated financial and operating data for our business for the periods presented. You should read the following summary financial data in conjunction with “Presentation of Financial and Other Information,” “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations” and our audited consolidated financial statements, all included elsewhere in this annual report. We prepare our audited consolidated financial statements in accordance with IFRS.
We derived the summary tables below from our audited consolidated financial statements included in this annual report. Our historical results are not necessarily indicative of the results to be expected in the future.
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Consolidated Statements of Profit or Loss and Other Comprehensive Income Data
For the Year Ended December 31,
2025 2024 2023
(in millions of U.S.$)
Revenues:
Passenger 4,860.5 5,150.9 4,504.2
Air Cargo 312.4 296.1 269.9
Other 187.7 172.9 142.0
Total revenue 5,360.6 5,619.9 4,916.1
Operating expenses:
Jet-fuel 1,137.6 1,236.6 1,310.2
Wages, salaries and benefits 1,148.1 1,084.2 896.1
Maintenance 231.5 258.2 232.2
Aircraft, communication and traffic services 614.5 591.0 532.1
Passenger services 150.7 140.8 113.6
Travel agent commissions 97.0 122.2 112.0
Selling and administrative 359.3 406.3 357.5
Aircraft leasing 17.7 16.2 23.8
Depreciation and amortization 730.3 655.1 579.8
Impairment (reversal) (3.7 ) — 3.4
Other loss, net 26.7 48.5 36.5
Share of (gain) on equity accounted investees, net of tax (77.2 ) (5.9 ) 3.1
Total operating expenses 4,432.5 4,553.2 4,200.3
Total operating income 928.1 1,066.7 715.8
Finance income (cost):
Finance income 31.6 77.9 70.8
Finance cost (545.7 ) (447.4 ) (498.9 )
Net finance cost (514.1 ) (369.5 ) (428.1 )
Income before income tax 414.0 697.2 287.7
Income tax expense 62.1 79.7 14.3
Income for the year 351.9 617.5 273.4
Consolidated Statements of Financial Position Data
As of December 31,
2025 2024 2023
(in millions of U.S.$)
Assets
Current assets:
Cash and cash equivalents 1,024.2 842.0 937.7
Derivative financial instruments — — 0.3
Trade and other receivables 699.9 591.5 618.2
Due from related parties 2.6 3.1 1.2
Prepayments and deposits 78.5 70.3 48.7
Inventories 174.4 139.7 108.5
Total current assets 1,979.6 1,646.6 1,714.6
Non-current assets:
Property and equipment, including right-of-use 3,674.0 3,206.6 2,787.6
Intangible assets and goodwill 1,098.2 1,080.4 1,071.8
Prepayments and deposits 150.1 160.5 149.0
Investments in equity accounted investees — 17.0 27.1
Other non-current assets 11.2 10.8 6.7
Deferred tax assets 280.0 261.7 335.0
Total non-current assets 5,213.5 4,737.0 4,377.2
Total assets 7,193.1 6,383.6 6,091.8
Liabilities
Current liabilities:
Loans and borrowings, including leases 450.5 448.3 523.2
Trade and other payables 1,710.9 1,652.2 1,533.5
Due to related parties 1.1 0.8 14.4
Provisions 56.6 117.2 85.9
Air traffic liability 505.9 617.2 836.4
Frequent flyer program 288.7 288.0 247.2
Income taxes payable and employee’s statutory profit sharing 82.2 69.5 28.8
Total current liabilities 3,095.9 3,193.2 3,269.4
Non-current liabilities:
Loans and borrowings, including leases 3,604.5 3,252.6 2,711.1
Frequent flyer program 344.1 300.4 268.3
Provisions 331.6 207.1 218.9
Employee benefits 274.1 209.1 235.8
Deferred tax liabilities 135.1 121.1 121.2
Total non-current liabilities 4,689.4 4,090.3 3,555.3
Total liabilities 7,785.3 7,283.5 6,824.7
Equity (deficit):
Capital stock 3,504.1 3,526.0 4,326.9
Share premium (2,182.9 ) (2,182.9 ) (2,182.9 )
Statutory reserve 24.8 24.8 24.8
Stock repurchase reserve 29.7 29.7 29.7
Equity accounted investees share of OCI (6.6 ) (6.6 ) (6.6 )
Remeasurement of defined benefit liability 5.2 17.1 13.1
Accumulated deficit (1,968.6 ) (2,310.1 ) (2,939.9 )
Total deficit attributable to equity holders of the Company (594.3 ) (902.0 ) (734.9 )
Non-controlling shareholders 2.1 2.1 2.0
Total deficit (592.2 ) (899.9 ) (732.9 )
Total equity and liabilities 7,193.1 6,383.6 6,091.8
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Non-IFRS Financial Measures and Reconciliations
We prepare our audited consolidated financial statements in accordance with IFRS. In addition to disclosing financial results prepared in accordance with IFRS, we disclose information regarding Adjusted EBITDA and Adjusted EBITDAR, which are non-IFRS measures. We believe these financial reporting measures to be useful indicators of our operational performance. These known performance measurements in the aviation industry are frequently used by investors, stock analysts and others who are interested in comparing the operational performance of companies in our industry.
We define Adjusted EBITDA as profit or loss for the period before income tax expense (benefit), depreciation and amortization, net finance cost, and impairment (reversal).
We define Adjusted EBITDAR as Adjusted EBITDA before aircraft leasing expenses. We consider Adjusted EBITDAR to be solely a valuation metric, not a performance metric.
Adjusted EBITDA and Adjusted EBITDAR have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under IFRS. Some of these limitations are: (i) they do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; (ii) they do not reflect changes in, or cash requirements for, our working capital needs; (iii) they do not reflect our cash requirements necessary to service interest or principal payments on our debt; (iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and they do not reflect any cash requirements for such replacements; (v) they do not adjust for all non-cash income or expense items that are reflected in our consolidated statements of profit or loss and other comprehensive income; (vi) they do not reflect the impact of all non-recurring items; and (vii) other companies in our industry may calculate these measures, or similarly titled measures, differently than we do, limiting their usefulness as comparative measures.
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We believe that while Adjusted EBITDAR excludes aircraft leasing expense, it is a useful valuation measure commonly used by investors, securities analysts and other interested parties to derive valuation estimates without consideration of the impact of distinct aircraft financing and ownership methodologies, which vary and are not consistently comparable among airlines. Because aircraft leasing expense is excluded from Adjusted EBITDAR (in addition to the items excluded from Adjusted EBITDA), the measure permits the reader to isolate (i) the accounting effects of aircraft acquisition, which may be made through direct purchase, acquisition debt or leases, with each methodology being presented differently for accounting purposes; and (ii) other items that would be accounted for as part of the assets that were acquired as opposed to leased, such as charges that fall into the exceptions of IFRS 16, including variable lease payments and supplemental rent (in addition to the items excluded from Adjusted EBITDA).
However, Adjusted EBITDAR should not be viewed as a measure of our financial performance or considered in isolation or as an alternative to our net income because it excludes aircraft lease expense, which is a normal, recurring cash operating expense that is necessary to operate our business. Because of this exclusion, Adjusted EBITDAR has limitations as an analytical tool. Accordingly, the usefulness of Adjusted EBITDAR as a performance measure is limited, and you are cautioned not to place undue reliance on this information when analyzing our results of operations and financial condition or as a measure of our financial performance. In addition, other companies in our industry may calculate Adjusted EBITDAR or similarly titled measures differently than we do, limiting its usefulness as a comparative measure.
Adjusted EBITDA
The following table sets forth a reconciliation of our profit or loss to Adjusted EBITDA for each of the periods indicated.
For the Year Ended December 31,
2025 2024 2023
(in millions of U.S.$)
Income for the year 351.9 617.5 273.4
Income tax expense 62.1 79.7 14.3
Depreciation and amortization(1) 730.3 655.1 579.8
Net finance cost(2) 514.1 369.5 428.1
Impairment (reversal) (3.7 ) — 3.4
Adjusted EBITDA(3) 1,654.7 1,721.8 1,299.0
(1) Depreciation and amortization expense as presented in our consolidated statement of profit or loss.
(2) See Note 31 to our audited consolidated financial statements.
(3) We define Adjusted EBITDA as profit or loss for the period before income tax expense, depreciation and amortization, net finance cost, and impairment (reversal). Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under IFRS. Because the adjustments to Adjusted EBITDA are not determined in accordance with IFRS, this measure may be calculated differently by other companies. As a result, Adjusted EBITDA as presented may not be directly comparable to similarly named measures presented by other companies.
Adjusted EBITDAR
The following table sets forth a reconciliation of our profit or loss to Adjusted EBITDAR for each of the periods indicated.
For the Year Ended December 31,
2025 2024 2023
(in millions of U.S.$)
Income for the year 351.9 617.5 273.4
Income tax expense 62.1 79.7 14.3
Depreciation and amortization(1) 730.3 655.1 579.8
Net finance cost(2) 514.1 369.5 428.1
Impairment (reversal) (3.7 ) — 3.4
Aircraft leasing(3) 17.7 16.2 23.8
Adjusted EBITDAR(4) 1,672.4 1,738.0 1,322.8
(1) Depreciation and amortization expense as presented in our profit or loss.
(2) See Note 31 to our audited consolidated financial statements.
(3) Aircraft leasing is comprised of short-term rentals of flight equipment, including subject to PBH period.
(4) We define Adjusted EBITDAR as Adjusted EBITDA plus aircraft leasing expense. We consider Adjusted EBITDAR to be solely a valuation metric, not a performance metric. Adjusted EBITDAR has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under IFRS. Because the adjustments to Adjusted EBITDAR are not determined in accordance with IFRS, this measure may be calculated differently by other companies. As a result, Adjusted EBITDAR as presented may not be directly comparable to similarly named measures presented by other companies.
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Factors affecting our results of operation
General
Our operating and business performance depends on factors that affect airlines and their markets, including trends that affect the broader travel industry, as well as trends that affect the specific markets in which we operate, and our target customer base.
We believe the following factors are key to our performance:
• competition;
• fuel costs;
• labor relations;
• aircraft maintenance costs;
• fleet availability and leasing costs;
• the availability of adequate airport infrastructure;
• financing costs;
• seasonality; and
• domestic and international economic conditions.
For the years ended December 31, 2023 and 2024, our results of operations were also impacted by the conclusion of our Chapter 11 proceedings in 2022, the renegotiation of our aircraft leases and expiration of the last of our PBH periods in 2023, and the prepayment of the exit financing notes due 2027 in 2024, as described in more detail below.
Other non-recurrent items have also impacted our results of operations during the periods under discussion. For example, in 2025, we recognized an income of $71.1 million from the sale of the Company’s 50% equity interest in TechOps MX, in addition to our share of TechOps MX’s net results through November 2025 of $6.1 million, a joint venture owned in equal parts by Aeroméxico and Delta, dedicated to providing aircraft maintenance and repair services and non-capitalized administrative expenses of $4.3 million related to our Initial Public Offering. In 2024, we recognized $165.8 million of non-recurrent favorable effects within operating income and net income and $160.3 million within Adjusted EBITDAR, comprising (i) compensation from Boeing for financial damages related to the Boeing 737 MAX grounding, and (ii) estimated breakage from unused tickets resulting from the extension of ticket usage rules introduced under prior years’ commercial flexibility initiatives.
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Competition
The airline industry is highly competitive. The main factors that affect the performance of the airline industry include:
• price and volume of fares and ancillary services;
• flight schedules;
• routes to and from certain cities;
• frequent flyer programs;
• ancillary products and passenger amenities;
• customer service;
• fleet type; and
• reputation.
Price competition is common across our industry and typically varies from market to market. We are subject to price competition in Mexico and in all of the international markets in which we operate. We continually monitor pricing across the passenger air travel market in order to gauge the competitiveness of our fares. Market participants, particularly ULCCs, often adopt price discounts, targeted promotions and changing price structures, which can make it challenging for us to respond and ensure that we are providing competitive rates, services and products. Unlike the FSCs, the ULCC business model consists of offering a basic fare only for the air travel, and the passenger purchases ancillary services, such as carry-on and checked bags or seat assignment, separately. As such, the total price for the trip varies according to the basic fare and the add-on services selected by the passenger. By contrast, our business model, as an FSC, consists of offering different fare classes, and each class includes certain sets of services. Although the passenger may choose add-on services, usually the total price the customer pays is close to the fare price. As a result, ULCCs influence the total price customers pay by modifying the fare price or the price of their add-on services, which increases their price competitiveness. Our current and potential competitors include both Mexican-based ULCCs that provide services within the Mexican air travel market and, on a limited basis, international flights; and traditional international network carriers that provide full service, including international wide-body and long-haul services.
We are an FSC focused primarily on business travelers and less price-sensitive leisure and VFR travelers. Our main competitors in the Mexican domestic market are ULCC carriers that primarily attract VFR and price-sensitive leisure travelers and lower income travelers, many of whom are new to air travel. While air travel continues to gain popularity in Mexico, we also compete with ground transportation alternatives, such as medium- and long-distance buses. We have seen a significant shift in Mexican travel preference from bus trips to air trips over the last several years and believe that this trend will persist going forward.
In addition to our company, many airlines based outside of Mexico provide international scheduled passenger air service to and from Mexico and cover destinations traditionally attractive to passengers arriving in and departing from Mexico. We compete directly with different groups of international airlines depending on the route. Our main international travel competitors include traditional network carriers and ULCCs.
Jet fuel prices
We depend on the availability of reasonably priced jet fuel to operate our business. However, jet fuel prices and availability are subject to market fluctuations, refining capacity, market surpluses and shortages and demand for heating oil, gasoline and other petroleum products, as well as meteorological, economic and political factors and global events, which we can neither control nor accurately predict.
Jet fuel, our largest operating expense, represented 21.2%, 22.0% and 26.7% of our total revenue in 2025, 2024 and 2023, respectively. Accordingly, the levels of, and fluctuation in, jet fuel prices significantly affect our results of operations.
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As of the date of this annual report, we obtain fuel in Mexico from World Fuel and ASA. World Fuel is among the largest fuel suppliers in the world and is our main supplier. We entered into the World Fuel supply agreement in January 2019, which was renewed in 2022 and 2025 and expires in April 2027. ASA continues to be the leading supplier of jet fuel in Mexico through its network of aviation fuel stations throughout the country, and we entered into the ASA fuel supply agreement on December 31, 2021. Our current agreement with ASA expires on December 31, 2028. We typically initiate routine renewal discussions with ASA approximately three months ahead of the expiration.
The price that we pay for fuel under the ASA and World Fuel contracts is reflective of fuel base prices set by ASA’s board of directors based on the price determined by PEMEX, the Energy Regulatory Commission (Comisión Reguladora de Energía) and the Ministry of the Treasury and Public Credit of Mexico (Secretaría de Hacienda y Crédito Público), or the SHCP. Such prices are also impacted by the U.S. Gulf Coast Waterborne Fuel international index because PEMEX is subject to this pricing for the oil that it sources from third parties. The price we pay for imported fuel under the World Fuel agreement is based on Platt’s USGC Jet 54 Prompt Pipeline. Logistical factors also impact the price we pay. Depending on the delivery distance to the airport, pipeline and tank car rail transport may be used, with rates charged for these delivery methods added to the price we pay. Accordingly, the fuel price we pay is subject to regular adjustment.
To cover our fuel needs at airports outside of Mexico, we purchase fuel from local suppliers that supply such airports, such as Chevron, Valero and British Petroleum, at prices generally based on the Platt’s Oilgram Price Report applicable in the relevant region. For purchases outside of Mexico, we work closely with Delta to leverage volume discounts and better credit conditions and mitigate the impact of supply chain disruptions.
The price of jet fuel is highly correlated to the price of crude oil. According to EIA, in 2025, crude oil prices generally declined, with supplies in global markets exceeding the demand. Jet fuel prices were 13% lower on average in 2024 compared to 2023 and the jet fuel crack margin narrowed as refinery capacity improved and airlines, including us, implemented fuel efficiency improvements and fleet upgrades that dampened jet fuel demand growth. Between 2024 and 2025, jet fuel prices experienced a further notable decline, with our average price per gallon decreasing from $2.67 in 2024 to $2.48 in 2025, reflecting a combination of factors including lower crude oil prices, easing refinery margins, and increased supply.
However, jet fuel prices have sharply increased during the beginning of 2026. Jet fuel prices were 49.4% higher on average in March 2026 compared to March 2025, primarily as a result of the ongoing conflict in the Middle East, including the escalating hostilities involving the United States, Israel and Iran, and the continued threat of broader regional escalation. The conflict has adversely affected global oil supply and, consequently, our fuel costs, particularly as a result of Iran’s disruption of the Strait of Hormuz, through which a significant share of global seaborne oil exports pass. Although we do not have any direct operations in Israel, Egypt, Iran, Jordan, Lebanon, Syria, the West Bank or Gaza, we have been and will likely continue to be affected by the broader consequences of the ongoing conflict in the Middle East, including increased supply chain disruptions, reduced access to and higher prices of fuel and other effects on the global economy. We cannot predict the duration, escalation or resolution of the ongoing conflicts in the Middle East, and there can be no assurance that such conflicts will cease or that their impact on global oil supply and jet fuel prices will not worsen.
From time to time and on certain routes, we apply fare increases or fuel surcharges to our air tickets to partially or fully mitigate the impact of higher fuel prices. We believe that we have been able to pass through the added fuel costs to our customers on most of our routes. However, the effectiveness of these actions may vary depending on market conditions and the magnitude and duration of fuel price increases. In periods of sustained or significant fuel price volatility, including those driven by geopolitical events, our ability to fully offset higher fuel costs through pricing actions may be more limited. We continue to actively monitor market conditions and adapt our commercial and network strategies accordingly.
Our current jet fuel hedging policy provides that 40% to 60% of our estimated fuel consumption in a 12-18-month period may be hedged. Before the COVID-19 pandemic, we used call and call spreads to execute this policy. We paused the use of fuel hedges in the beginning of 2020 and currently are not hedging our jet fuel expenses.
For more information about our jet fuel agreements, see “Item 4. Information on the Company—B. Business Overview—Business—Jet Fuel” and for the risks related to jet fuel availability and price variations, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—We are highly impacted by volatility in the price and availability of jet fuel.”
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Labor relations
The airline industry is heavily unionized in most countries, including Mexico. Wages, benefits and work rules of unionized airline industry employees are determined by CBAs. As of December 31, 2025, 2024 and 2023, we had 17,068, 16,608 and 15,943 employees in Mexico, respectively. The majority of our employees are located in Mexico and the remainder are distributed across the destinations in which we operate. As of December 31, 2025, 2024 and 2023, 11,993, 11,719 and 11,267, respectively, of our employees in Mexico were represented by labor unions, representing 70.3%, 70.6% and 70.7%, respectively, of our total employees in Mexico.
Our employees are represented by the following different unions:
• ASPA, which represents Aeroméxico’s and Aeroméxico Connect’s pilots;
• ASSA, which represents Aeroméxico’s flight attendants;
• Independencia, which represents Aeroméxico’s maintenance and airport staff and Aeroméxico Cargo’s staff;
• SNTTTAS, which represents Aeroméxico Sistemas Integrados’ employees; and
• STIA, which represents Aeroméxico Connect’s flight attendants and maintenance staff.
We are party to CBAs with the unions that represent our employees. The CBAs currently in effect expire as follows:
• ASPA: the CBA with Aeroméxico expires on September 30, 2026, and the CBA with Aeroméxico Connect expires on November 30, 2026;
• ASSA: the CBA with Aeroméxico expires on May 31, 2026;
• STIA: the CBA with Aeroméxico Connect expires on September 30, 2028;
• Independencia: the CBA with Aeroméxico expires on October 13, 2028, and the CBA with Aeroméxico Cargo expires on October 27, 2028; and
• SNTTTAS: the CBA with Aeroméxico Sistemas Integrados expires on April 15, 2028.
To become effective, a CBA needs to be approved by the union and by the majority of the union members in a subsequent consultation process. The CBAs are renegotiated annually with respect to salary and every two years for other terms.
Conditions included in the aforementioned CBAs may vary substantially, depending upon a number of factors, including inflation, economic conditions and the general relationship between unions and the private sector, none of which are within our control.
As a result, our relations with our employees, including the terms that we are able to negotiate with the unions through CBAs, constitute a significant factor affecting our results of operations. In particular, the wages, salaries and benefit expenses that we are required to pay may increase as a result of any new terms negotiated with our labor unions upon expiration of the respective CBAs. For further information about the risks related to our labor relations, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—Our business may be adversely affected if our labor relations deteriorate, we fail to renew our CBAs on satisfactory terms or experience strikes or other labor unrest.”
Aircraft maintenance
We are required to maintain our aircraft to ensure passenger safety, smooth and timely operation of our flights, efficiency of our operations and to comply with the terms of our aircraft leases. We are responsible for the cost and the performance of this maintenance and therefore the complexity, frequency and volume of aircraft maintenance is a significant factor affecting the availability of aircraft and our results of operations.
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The maintenance of our aircraft and engines has several complexity levels, and each level involves significantly different labor and material inputs. Airframe line maintenance consists of daily and weekly scheduled maintenance, including pre-flight and overnight checks. Airframe heavy maintenance, by contrast, involves complex tasks that may take several weeks and is generally required every three, five or six years. The total maintenance costs and related depreciation of significant maintenance expense are subject to variables such as estimated utilization rates, average stage length, the interval between significant maintenance events, the size, age and make-up of our fleet, maintenance holidays, government regulations and the level of unscheduled maintenance events and their actual costs. For further information about the maintenance of our aircraft, see “Item 4. Information on the Company—B. Business Overview—Our Fleet—Maintenance.”
We also rely on certain types of engines and parts from a limited number of suppliers, and failures related to these components may adversely affect our operations. In early 2025, we observed recurring early signs of deterioration in the High-Pressure Turbine, or HPT, Stage 1 blades of certain LEAP-1B engines, or HPT Stage 1 Blades, supplied by CFM International, Inc., or CFM, which resulted in several unscheduled engine removals. We maintain a PBH agreement with CFM to provide additional engine support during repairs. However, the high number of inspections required, and possible removals, may lead to a shortage of spare engines, potentially causing a limited number of aircraft to be temporarily grounded. This circumstance, however, is not expected to materially affect our ability to carry out our current production plans.
As of the date of this annual report, we have conducted 240 inspections, resulting in 50 engine removals and have received 12 support spare engines from CFM to mitigate the impact on our network. For the full year of 2026, we expect to perform approximately 195 inspections in total, with 33 engine removals, all of which are now part of our engine fleet management removal plan. The data collected since 2025 has enabled us, in coordination with GE and CFM, to significantly improve the removal rate and the repair turn times, resulting in a projected reduction in the required number of support lease engines (from 12 to 8) by the end of 2026, while materially reducing the probability of any impact to our operational and financial stability. For further information, see “Item 4. Information on the Company—B. Business Overview—Our Fleet-Engines.”
As of December 31, 2025, the average age of our fleet of 165 aircraft was approximately 8.6 years. Since the COVID-19 pandemic, we upgauged our fleet by disposing of older, less efficient aircraft, and reducing the number of aircraft families we operate to three, which we believe streamlines our maintenance operation, improves training, simplifies our fleet and increases the consistency and reliability of our operations. For further information about our fleet, see “Item 4. Information on the Company—B. Business Overview—Young, modern and upgraded fleet,” and for the risks related to our reliance on a small number of manufactures, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—Our fleet consists entirely of aircraft manufactured by Boeing and Embraer, and we rely on a limited number of suppliers for our engines. As such, we are susceptible to issues that affect these suppliers.”
Fleet availability and leasing costs
As of December 31, 2025 and 2024, 79.4% and 77.0%, respectively, of our operating fleet was manufactured and assembled by Boeing, and 20.6% and 23.0%, respectively, by Embraer. As a result of this high level of concentration among two manufacturers, we are susceptible to issues that affect these suppliers, including their inability to comply with contractual obligations, delays in deliveries of aircraft or components for aircraft maintenance, safety issues and reputational problems. Problems with our suppliers may also cause delays in our operations as a result of inability to timely train staff to operate new aircraft and additional costs. If we were required to lease or purchase aircraft from another manufacturer, we would lose the benefits and economies of scale derived from the current composition of our fleet.
We lease the vast majority of our aircraft and spare engine fleet through operating lease agreements with a variety of established international aircraft leasing companies pursuant to which we pay monthly rent. The market for aircraft leasing and financing is active and not concentrated among few entities. We have lease agreements with more than 20 of the principal international aircraft lessors.
Our operating leases generally require that we pay a cash security deposit or provide a letter of credit in an amount equal to approximately one to two months’ rent. We also commit to operate, register, insure and maintain the aircraft and the lessor’s rights therein in accordance with specific requirements in each lease, and to return the aircraft in compliance with the redelivery conditions included in the lease.
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We also have aircraft finance leasing agreements supported by the Export-Import Bank of the United States, or EXIM, guarantees pursuant to which we follow a periodic schedule of interest and principal payments and have the option to acquire the aircraft at the end of the leasing period. These agreements were renegotiated during our Chapter 11 proceedings through omnibus financing agreements that may cover more than one aircraft. The interest rate of our finance leasing agreements is fixed. As of December 31, 2025, eight of our aircraft were subject to financing agreements classified as financial debt under IFRS, and the aggregate outstanding amount under these financing agreements was $71.9 million. The outstanding amount for each of our three aircraft financing agreements classified as financial debt under IFRS was $55.2 million, $13.9 million and $2.8 million. As of December 31, 2024, the aggregate outstanding amounts under these financing agreements was $107.5 million. The outstanding amount for each of our three aircraft financing agreements classified as financial debt under IFRS was $71.4 million, $24.9 million and $11.2 million. As of December 31, 2023, the aggregate outstanding amounts under these financing agreements was $142.1 million. The outstanding amounts for each of our three aircraft financing agreements were $87.1 million, $35.5 million and $19.5 million.
In 2025, one of our operating leases was converted into a finance lease. In 2024, we paid off two of our aircraft finance leases, and the respective aircraft are now currently owned by us.
Certain external factors, including macroeconomic or regulatory conditions in Mexico, may impact the financial terms and conditions of our aircraft leases. These terms and conditions are also susceptible to change in the prevailing market circumstances. For further information about the risks related to aircraft availability and leasing costs, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—and we rely on a limited number of suppliers for our engines. As such, we are susceptible to issues that affect these suppliers” and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—We may not be able to enter into long-term leases or obtain financing to purchase new aircraft.”
Availability of airport infrastructure
Our ability to operate efficiently and competitively depends upon the existence of adequate airport infrastructure, sufficient slots to cover demand and airport services that permit efficient operations. The high volume of traffic of our principal hub, MEX, which is capacity constrained, has had, and may continue to have, an impact on the efficiency of our operations and, as a consequence, our results. For instance, in April 2023, MEX imposed restrictions on flights outside MEX’s operating hours or the established take-off and landing schedules.
Also, MEX is subject to reductions in hourly operations and restrictions. In October 2022, an agreement among certain airlines and MEX resulted in a temporary reduction in hourly operations from 61 to 52 at MEX to permit the airport to make facilities related improvements. This reduction applied to international and Mexican carriers. A second temporary reduction in hourly operations from 52 to 43 came into effect on January 8, 2024. On May 26, 2025, an increase to 44 hourly operations was announced. Pursuant to a statement issued by AFAC in August 2023, the second reduction in hourly operations that started in January 2024 applies only to domestic flights from and to MEX operated by Mexican carriers. For further information about how inadequate airport infrastructure may affect our operations, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—Inadequate airport infrastructure or capacity and space restrictions in Mexico and at the International airports where we operate may limit our access to desirable slots and otherwise negatively impact our operations,” “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—Our operations are highly dependent on MEX” and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—We may be negatively impacted by the imposition of new procedural requirements imposed by the DOT under the current U.S. administration.”
Financing Costs
In November 2024, we concluded the issuance of the 2029 Notes and the 2031 Notes. The net cash proceeds of the offering were $1,096.0 million and were used to redeem, in full, $662.5 million outstanding principal amount of the exit financing notes due 2027, at a redemption price of 104.250%, plus interest, additional amounts and premiums payable. The remainder proceeds were used for general corporate purposes. As described in more detail below, our financial results for the year ended December 31, 2024 were impacted by the prepayment of our exit financing notes due 2027 and the related payment of an early redemption premiums and additional amounts. For further information about the 2029 Notes and 2031 Notes, see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Indebtedness—Senior Secured Notes due 2029 and 2031.”
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Seasonality
Our business and route network are subject to seasonal fluctuations. As such, our results for any interim period are not necessarily indicative for the entire year and we tend to experience higher volumes of air travel, and therefore higher revenues and operating results, during certain periods of the year as compared to others.
The demand for our services is usually comparatively high in July and August (due to high demand for vacation travel), March and April (corresponding to the Easter holiday) and December (due to the Christmas holiday), while the demand is usually comparatively low in the months of February, September and October. Because a large part of our focus is on business passengers, we believe that our business passenger client segment partially offsets the seasonal fluctuations that characterize VFR and leisure travel.
Economic conditions
Economic conditions in Mexico have a significant effect on our business and results of operations. Historically, demand for passenger flights in Mexico has been correlated with the country’s domestic GDP growth. Mexico is also one of the fastest growing aviation passenger markets in the world, with total passengers expanding at a 6.0% CAGR between 2014 and 2024, according to the World Bank. Passenger growth CAGR in Mexico between 2014 and 2024 was more than four times faster than Mexico’s real GDP CAGR of 1.3% over the same period, according to the World Bank. Total passengers expanded at a 5.5% CAGR between 2022 and 2024. Because all of our routes and scheduled service flights have their origin, destination or both at airports located in Mexico, we are highly impacted by local economic conditions.
According to the IMF, based on aggregate estimates for 2025 GDP figures, Mexico was the second largest economy in Latin America and the 15th largest economy in the world. Mexico’s GDP grew approximately 0.6% in 2025, and is expected to grow 1.6% in 2026, according to the same source.
The average yearly inflation rate in Mexico has been 5.5% over the last five years. Inflation has decreased since the beginning of 2023, and was 3.7%, 4.2% and 4.7% in December 2025, 2024 and 2023, respectively, according to INEGI. The annual inflation rate was estimated to be 4.2% in 2026, according to the Mexican Central Bank. As of December 2025, the unemployment rate in Mexico was 2.6%, according to the INEGI. Mexico’s relatively young population may also contribute to its economic growth, as the median age in Mexico was 29 according to INEGI’s last population and housing census in 2020. Collectively, we believe these macro trends are positive for our business as they strengthen air travel demand.
Economic conditions in the markets where we operate may also affect our business. Travel flux, whether for business or leisure, often depends on economic growth and other economic conditions, including inflation rates, interest rates and personal income levels, in each country. Social unrest, changes in government regimes and other external events, such as conflict in Israel, Iran and the Middle East and the military action in Ukraine and sanctions related to Russia, may also have unpredictable effects on the global economy or on the economies of the affected regions, which indirectly may affect domestic and international travel.
Description of Our Principal Line Items
Revenues
Our revenue consists mainly of passenger revenue, air cargo revenue and other revenue.
Passenger revenue
Passenger revenue primarily consists of airfare tickets, revenue from ancillary services (such as excess baggage, seat selection, upgrades and other charges to passengers), breakage from unused tickets and the decreases in compensation costs paid to passengers, as well as the cost of accumulated points in the Aeroméxico Rewards program.
Air cargo revenue
Air cargo revenue includes revenue generated by our cargo operations, which consist of domestic and international cargo transport.
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Other revenues
Other revenues mainly include income from agreements for services provided to airlines, insurance commission payments, charter flight services and other products and services, including car rental commissions, co-branded credit card fees, lounge access, and fees we charge for training that we offer through our subsidiary AM Formación.
In addition, as a result of the acquisition of control and our related consolidation of PLM from July 15, 2022, other revenues also include revenue from Aeroméxico Rewards points sold to third parties and reward points breakage. The reward points breakage consists of the estimated Aeroméxico Rewards points that are not expected to be redeemed by program members. For further information about the PLM consolidation, see “Item 4. Information on the Company—B. Business Overview—Business—Aeroméxico Rewards Loyalty Program—PLM—PLM Acquisition.”
Operating expenses
Our operating expenses consist mainly of the following line items:
Jet fuel
Jet fuel expenses constitute our largest operating expense. These expenses include the cost of fuel, related fees, fueling into-plane fees and transportation fees. They also include realized gains and losses that arise from any fuel price derivative activity we undertake qualifying for hedge accounting.
Wages, salaries and benefits
Wages, salaries and other benefits expenses include the salaries, hourly wages, employee health insurance coverage and variable compensation that are provided to employees for their services, as well as the related expenses associated with compulsory social security contributions, employee benefit plans, training costs and employer payroll taxes.
Maintenance
Maintenance expenses consist of costs related to airframe line maintenance, including required maintenance for the return of leased aircraft upon the termination of a lease and expenses under PBH agreements for the replacement of parts and components.
Aircraft, communication and traffic services
Aircraft, communication and traffic services expenses consist of costs related to Mexican and international airport services (which include landing and parking fees, use of counters and office space, passenger enplanement, aircraft turnaround services and handling of baggage and cargo) and air navigation services (which include navigation assistance and overflight).
Passenger services
Passenger services expenses consist of costs related to onboard services, which include catering services, inflight entertainment and Wi-Fi access.
Travel agent commissions
Travel agent commissions consist of proportional payments for indirect ticket sales by travel agencies, including online travel agencies. We typically pay travel agencies a standard commission depending on the geographic market and cabin type. We have agreements with certain travel agencies to award them performance incentives.
Selling and administrative
Selling and administrative expenses consist of advertising and promotional expenses directly related to our services, including the cost of web support, external call centers, professional fees paid to external advisors, fees and subscriptions, GDS reservation fees, insurance and information technology expenses.
Aircraft leasing
Aircraft leasing expenses consists of short-term (less than a year) costs related to our aircraft and engine leasing through short-term or PBH agreements with third parties.
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Depreciation and amortization
Depreciation and amortization expenses include the depreciation of all right-of-use, airframe heavy maintenance, other operating equipment and intangibles from the date they are available for use or, in respect of self-constructed assets, from the date that the asset is completed and ready for use.
Impairment (reversal)
Impairment consists of loss allowances for expected losses on assets based on estimates to determine their recoverable amount. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount on an annual basis.
Other loss, net
Other loss or income, net refers to the difference between other expenses, which consists mainly of non-creditable value added tax payments, labor and other contingencies and provisions, net loss from sale of property and equipment or obsolete material, contingent value rights and other items; and other income, which consists mainly of net gain from sale of property and equipment or obsolete material, taxes and leases recoveries, credit notes from suppliers, and other items.
Share of (gain) loss on equity accounted investees, net of tax
Our share of (gain) loss on equity accounted investees, net of tax refers to our equity gains or losses or gains in connection with our interests in one joint venture (TechOps MX) in 2025, 2024 and 2023.
Net finance cost
Finance income consists of interest income on funds invested, changes in the fair value of financial assets at fair value through profit or loss, and net foreign exchange gains that are recognized in profit or loss.
Finance cost consists of interest expense on borrowings, unwinding of the discount on provisions or dividends, changes in the fair value of financial assets at fair value through profit or loss, net foreign exchange losses, credit card commissions, leases interest, other financial costs (mainly the redemption of our exit financing Notes due 2027 bank fees or letters of credit commissions) and losses on derivative instruments that are recognized in profit or loss.
Income tax expense
Income tax expense or benefit consists of the recognition of current and deferred tax expenses or benefits.
Results of Operations
Year ended December 31, 2025 compared to the year ended December 31, 2024
The following table shows a summary of our consolidated statements of profit or loss, as well as the variation from the previous year, as a percentage, for the years indicated.
For the Year Ended December 31,
2025 2024 Variation Variation %
(in millions of U.S.$, except percentages)
Total revenue 5,360.6 5,619.9 (259.3 ) (4.6 )%
Total operating expenses 4,432.5 4,553.2 (120.7 ) (2.7 )%
Total operating income 928.1 1,066.7 (138.6 ) (13.0 )%
Net finance cost (514.1 ) (369.5 ) (144.6 ) (39.2 )%
Income before income tax 414.0 697.2 (283.3 ) (40.6 )%
Income tax expense 62.1 79.7 (17.6 ) (22.1 )%
Income for the year 351.9 617.5 (265.6 ) (43.0 )%
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Revenue
The following table shows the components of our revenue, as well as the composition of each category of our total revenue and the variation from the previous year, as a percentage, for the years indicated.
For the Year Ended December 31,
2025 2024 Variation Variation %
(in millions of U.S.$, except percentages)
Passenger revenue:
Passengers 4,305.2 4,504.8 (199.6 ) (4.4 )%
Ancillaries 555.3 646.1 (90.8 ) (14.1 )%
Total passenger revenue 4,860.5 5,150.9 (290.4 ) (5.6 )%
Non-ticket revenue:
Air cargo 312.4 296.1 16.3 5.5 %
Other 187.7 172.9 14.8 8.6 %
Total revenue 5,360.6 5,619.9 (259.3 ) (4.6 )%
Our total revenue in the year ended December 31, 2025 was $5,360.6 million, a decrease of 4.6%, or $259.3 million, as compared to the year ended December 31, 2024. This decrease was primarily the result of the following factors:
• Passenger revenue: Our passenger revenue, including ancillaries, which represent additional services related to air transportation service, decreased by 5.6%, or $290.4 million, to $4,860.5 million in the year ended December 31, 2025, as compared to $5,150.9 million in the year ended December 31, 2024. This decrease primarily reflects a decrease in domestic passenger revenue of 12.3%, or $275.1 million, from $2,242.0 million in the year ended December 31, 2024, to $1,966.9 million in the year ended December 31, 2025, primarily as a result of softer passenger demand in certain U.S. and Mexican border markets during the first half of 2025 and the depreciation of the Mexican peso. The impact of economic and political uncertainty on domestic border routes, and the Mexico–U.S. transborder Visiting Friends and Relatives (VFR) segment during the first half of the year was partially offset by a recovery trend in certain U.S. and Mexican markets that began in the third quarter and materialized during the fourth quarter. On domestic routes, passenger numbers decreased 6.5% in the year ended December 31, 2025, when compared to the year ended December 31, 2024.
• Air cargo revenues: Our air cargo revenues increased by 5.5%, or $16.3 million, to $312.4 million in the year ended December 31, 2025, as compared to $296.1 million in the year ended December 31, 2024. This increase primarily reflects an increase in transported cargo volume, as a result of higher domestic demand, and increased revenue per unit of international cargo capacity, or international cargo yield; and
• Other revenues: Other revenues increased to $187.7 million in the year ended December 31, 2025, as compared to $172.9 million in the year ended December 31, 2024, mainly reflecting an increase in revenues related to Aeroméxico Rewards redemptions and commissions.
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Operating expenses
The following table shows the components of our operating expenses for the year ended December 31, 2025, and the year ended December 31, 2024, together with the changes in our operating expenses between these two years.
For the Year Ended December 31,
2025 % of operating expenses 2024 % of operating expenses Variation %
(in millions of U.S.$, except percentages)
Jet fuel 1,137.6 25.6 % 1,236.6 27.2 % (8.0 )%
Wages, salaries and benefits 1,148.1 25.9 % 1,084.2 23.8 % 5.9 %
Maintenance 231.5 5.2 % 258.2 5.7 % (10.3 )%
Aircraft, communication and traffic services 614.5 13.9 % 591.0 13.0 % 4.0 %
Passenger services 150.7 3.4 % 140.8 3.1 % 7.0 %
Travel agent commissions 97.0 2.1 % 122.2 2.7 % (20.6 )%
Selling and administrative 359.3 8.1 % 406.3 8.9 % (11.6 )%
Aircraft leasing 17.7 0.4 % 16.2 0.4 % 9.1 %
Depreciation and amortization 730.3 16.5 % 655.1 14.4 % 11.5 %
Impairment (reversal) (3.7 ) n.m. — — —
Other loss, net 26.7 0.6 % 48.5 1.1 % (44.9 )%
Share of (gain) loss on equity accounted investees, net of tax (77.2 ) (1.7 )% (5.9 ) n.m. —
Total operating expenses 4,432.5 100.0 % 4,553.2 100.0 % (2.7 )%
We recorded total operating expenses of $4,432.5 million in the year ended December 31, 2025, representing a decrease of 2.7%, or $120.7 million, as compared to $4,553.2 million in the year ended December 31, 2024. This decrease primarily reflects lower jet fuel expenses due to reduced fuel prices, ongoing cost-efficiency initiatives, operational efficiencies associated with the introduction of additional Boeing 737 MAX aircraft and gain on equity accounted investees, net of tax. These decreases were partially offset by increases in our depreciation and amortization, wages, salaries and benefits, aircraft, communication and traffic services and passenger services expenses, as described below.
• Jet fuel: Our jet fuel expenses decreased by 8.0%, or $99.0 million, to $1,137.6 million in the year ended December 31, 2025, as compared to $1,236.6 million in the year ended December 31, 2024. This decrease primarily reflects a 7.6% decrease in the average cost of fuel per liter, from $0.71 per liter in 2024 to $0.65 per liter in 2025; and the use of new and more efficient aircraft in our fleet, which reduced our fuel consumption per ASM. Total fuel consumption decreased by 0.4%, or 7.5 million liters, to 1.7 billion liters of jet-fuel in the year ended December 31, 2025, as compared to 1.8 billion liters in the year ended December 31, 2024;
• Wages, salaries and benefits: Wages, salaries and benefits increased by 5.9%, or $64.0 million, to $1,148.1 million in the year ended December 31, 2025, as compared to $1,084.1 million in the year ended December 31, 2024. This increase primarily reflects the renegotiation of all collective bargaining agreements in 2024 and the appreciation of the Mexican peso during the second half of the year, which increased peso-denominated expenses;
• Maintenance: Our maintenance costs decreased by 10.3%, or $26.7 million, to $231.5 million in the year ended December 31, 2025, as compared to $258.2 million in the year ended December 31, 2024. This decrease was mainly driven by a lower leased aircraft return provision, reflecting the current fleet plan and related actuarial calculations. In addition, since July 1, 2024, we have been recognizing the portion corresponding to the interest cost included in this provision within finance costs rather than maintenance;
• Aircraft, communication and traffic services: Our expenses relating to aircraft, communication and traffic services increased by 4.0%, or $23.5 million, to $614.5 million in the year ended December 31, 2025, as compared to $591.0 million in the year ended December 31, 2024. This increase primarily reflects an increase in international flight volumes, which increased by 3.4% in terms of international ASMs, and the upgauging of our fleet, as traffic services expenses are higher for larger aircraft, which we primarily use for our international routes;
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• Passenger services: Our passenger services expenses increased by 7.0%, or $9.9 million, to $150.7 million in the year ended December 31, 2025, as compared to $140.8 million in the year ended December 31, 2024. This increase primarily reflects an increase in international operations, which increased by 3.4% in terms of international ASMs, and an increase of 2.4% in the number of international passengers;
• Travel agent commissions: Our travel agent commission expenses decreased by 20.6%, or $25.2 million, to $96.9 million in the year ended December 31, 2025, as compared to $122.1 million in the year ended December 31, 2024. This decrease primarily reflects a softening of passenger demand during the first half of the year, which resulted in lower bonus commissions and performance-based incentives to travel agencies, one of our major indirect sales channels and efficiencies that increasingly favor direct distribution channels of passenger tickets;
• Selling and administrative: Our selling and administrative expenses decreased by 11.6%, or $47.0 million, to $359.3 million in the year ended December 31, 2025, as compared to $406.3 million in the year ended December 31, 2024. This decrease primarily reflects efficiencies that increasingly favor direct distribution channels of passenger tickets, lower passenger volumes and lower variable expenses associated with passenger services, such as reservation costs and other commercial marketing expenses, including advertising expenses and lower administrative expenses, such as professional services payments;
• Aircraft leasing: Our expenses related to aircraft leasing increased slightly to $17.7 million in the year ended December 31, 2025, as compared to $16.2 million in the year ended December 31, 2024. This increase primarily reflects variations in costs related to short-term leases of B787-9 engines;
• Depreciation and amortization: Our depreciation and amortization expenses increased by 11.5%, or $75.2 million, to $730.3 million in the year ended December 31, 2025, as compared to $655.1 million in the year ended December 31, 2024. This increase mainly results from the amortization of major maintenance investments driven by engine and airframe maintenance performed in line with our maintenance plan and the depreciation of right-of-use assets associated with the incorporation of new Boeing 737 MAX aircraft to the fleet in the year ended December 31, 2025;
• Impairment (reversal): We recorded a $3.7 million reversal in the year ended December 31, 2025, as compared to no impairment expenses in the year ended December 31, 2024. This reversal results from an increase in the fair value of corporate office buildings related to our rights in a fiduciary trust for the development of new office spaces;
• Other loss, net: Our other loss decreased by 44.9%, or $21.9 million, to $26.7 million in the year ended December 31, 2025, as compared to $48.5 million in the year ended December 31, 2024. This variation primarily reflects a decrease of $8.0 million in value added tax non-creditable expenses and a $7.7 million decrease in contingencies provisions mainly associated to the CAN (formerly, COFECE) fine recognized in 2024; the return to us of $10.0 million held by certain customs authorities as security deposits paid in past years, and a decrease of $10.0 million in contingent value rights expense in 2025 compared to 2024. These effects were partially offset by other expenses including a $10.0 million charge related to the Joint Cooperation Agreement with Delta;
• Share of (gain) loss on equity accounted investees, net of tax: Our share of gain on equity accounted investees increased to $77.2 million in the year ended December 31, 2025, as compared to a gain of $5.9 million in the year ended December 31, 2024. This increase primarily reflects a gain of $71.1 million recognized in connection with the sale of our 50% equity interest in TechOps MX on December 30, 2025, in addition to our share of TechOps MX’s net results through November 2025 of $6.1 million.
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Net finance cost
The following table shows the components of our net finance cost, as well as the change from the previous year, as a percentage, for the years shown:
For the Year Ended December 31,
2025 2024 Variation %
(in millions of U.S.$, except percentages)
Finance income 31.6 77.9 (59.4 )%
Finance cost (545.7 ) (447.4 ) 22.0 %
Net finance cost (514.1 ) (369.5 ) 39.2 %
Our net finance cost increased by $144.6 million, or 39.2%, to $514.1 million in the year ended December 31, 2025, as compared to $369.5 million in the year ended December 31, 2024. This net increase primarily reflects a net foreign exchange loss of $45.8 million in the year ended December 31, 2025 compared to a net foreign exchange gain of $22.4 million in the year ended December 31, 2024, driven by the appreciation of the peso against the dollar in the year ended December 31, 2025; an increase in lease interest to $228.5 million in the year ended December 31, 2025 compared to $183.9 million in the year ended December 31, 2024; an increase in interest on leased aircraft return provision to $27.2 million in the year ended December 31, 2025 compared to $10.6 million in the year ended December 31, 2024; and an increase in interest expense on financial liabilities to $100.0 million in the year ended December 31, 2025 compared to $78.9 million in the year ended December 31, 2024. Additionally, interest income on bank deposits decreased to $31.6 million in the year ended December 31, 2025 from $55.5 million in the year ended December 31, 2024, further contributing $23.9 million to the increase in net finance cost. These increases were partially offset by a decrease in other financial costs to $7.8 million in the year ended December 31, 2025 compared to $41.6 million in the year ended December 31, 2024, which in 2024 included early termination costs related to the redemption of exit financing notes. Other net changes in finance costs, including credit card commissions, interest on employee obligations, and bank fees, contributed an additional net increase of $4.3 million.
Income tax expense
Our statutory tax rate was 30% for both the year ended December 31, 2025 and December 31, 2024. Our income tax expense decreased by 22.1%, or $17.6 million, to $62.1 million in the year ended December 31, 2025, corresponding to a 15% effective tax rate, compared to $79.7 million, or an 11% effective tax rate, in the year ended December 31, 2024, based on our income tax expense estimates for each year.
Year ended December 31, 2024 compared to year ended December 31, 2023
For a comparison of our results of operations for the years ended December 31, 2024 and 2023, and for a breakdown of our revenues by geographic market in 2023, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations—Year ended December 31, 2024 compared to the year ended December 31, 2023,” in the prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act, relating to the registration statement on Form F-1 (File No. 333-279379).
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SELECTED STATISTICAL INFORMATION
Operating Data
The following table sets forth certain selected operating data relating to our business for each of the years indicated:
For the Year Ended December 31,
2025 2024 2023
Total passengers (thousands)(1) 24,587 25,338 24,760
ASM
Total, ASM (millions) 35,804 35,642 32,925
ASMs on schedule (millions)(2) 35,790 35,640 32,921
RPM
RPM (millions) 30,751 30,853 27,729
RPM on schedule (millions)(3) 30,746 30,852 27,726
Load factor 85.9 86.6 84.2
RASM (cents) 15.0 15.8 14.9
PRASM (cents) 12.0 12.6 12.3
Yield (cents) 8.7 9.1 9.1
CASM
CASM (cents) 12.5 12.7 12.6
CASM ex fuel (cents) 9.3 9.2 8.6
Consumed fuel (in millions of liters) 1,743.4 1,750.9 1,641.9
Number of employees 17,364 16,876 16,219
Average daily departures(4) 535 555 586
Number of aircraft at the end of the year 165 148 146
(1) The number of passengers includes passengers who exchange Aeroméxico Rewards points and other travel awards and passengers of all flight segments, including charter flights.
(2) ASM for all scheduled flight segments.
(3) RPM for all scheduled flight segments.
(4) The average number of departures per day during the indicated year.
B. Liquidity and Capital Resources
Liquidity and Capital Resources
General
Our primary capital needs consist of:
• working capital needs;
• debt service, including aircraft and other leases; and
• capital expenses related to:
• acquisition of equipment;
• airframe heavy maintenance expenses; and
• maintenance reserves and acquisition of properties and equipment.
Our primary sources of liquidity have traditionally consisted of the following:
• net cash flows from operating activities; and
• short- and long-term loans and borrowings, mainly consisting of working capital lines of credit, aircraft leases, debt offerings and securitizations.
Regarding our loans and borrowings, including aircraft and other leases, we believe that our current commitments for the next 12 months as of December 31, 2025, will represent only approximately 11.1% of loans and borrowings.
We believe that our working capital is sufficient for our present requirements.
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Cash flows
The following table presents a summary of our cash flows for the years shown:
For the Year Ended December 31,
2025 2024 Variation % 2023 Variation %
(in millions of U.S.$, except percentages)
Net cash from operating activities 913.1 1,367.5 (33.2 )% 1,345.1 1.7 %
Net cash used in investing activities (270.5 ) (489.0 ) (44.7 )% (406.2 ) 20.4 %
Net cash used in financing activities (496.2 ) (920.1 ) (46.1 )% (909.8 ) 1.1 %
Net cash flows from operating activities
Operating activities provide our main source of cash flows to fund our operations.
We recorded net cash flows from operating activities of $913.1 million in 2025, as compared to $1,367.5 million in 2024. This 33.2% reduction is primarily due to the decrease in our profitability as reflected by our net income of $351.9 million for the year ended December 31, 2025, as compared to net income of $617.5 million for the year ended December 31, 2024. The decrease in net cash flows from operating activities was also impacted by an increase in trade and other payables disbursements of $147.6 million as a result of payments to suppliers in connection with the acquisition of rotable spare parts for major maintenance, a net increase in interest paid of $48.4 million associated to the incremental fleet leases and a net increase in income tax paid of $37.7 million in the year ended December 31, 2025, as compared to 2024. These additional outflows were partially offset by a net improvement of $83.6 million in trade and other receivables in the year ended December 31, 2025, as compared to the year ended December 31, 2024, and an increase in cash obtained through air traffic liability of $107.9 million in the year ended December 31, 2025 as compared to 2024.
Future acquisitions financed with our own resources could deplete the cash and working capital available to adequately fund our operations. We may also finance future transactions through debt or equity offerings, or through the use of existing cash, cash equivalents, and investments. To the extent the applicable authorization is approved by our shareholders at our shareholders’ meeting to be held on April 30, 2026, we may from time to time carry our share repurchase transactions subject to applicable law and market conditions, which may affect the trading price and liquidity of our ADSs. Acquisitions financed through equity offerings could dilute the ownership interests of our shareholders and adversely affect the market price of the ADSs. Acquisitions financed through debt offerings may require us to dedicate a substantial portion of our cash flow to principal and interest payments and could subject us to restrictive covenants.
Net cash flows used in investing activities
Our net cash used in investing activities decreased by 44.7%, or $218.5 million, to $270.5 million in 2025, compared to $489.0 million in 2024. This decrease is primarily due to a decrease of $88.3 million in cash used for acquisition of properties and equipment (including major maintenance), from $422.8 million in the year ended December 31, 2024 to $334.5 million in the year ended December 31, 2025; an increase of $30.8 million from proceeds from sale of properties and equipment to $33.6 million in 2025 from $2.8 million in 2024; a decrease of $31.6 million in cash used for prepayments of maintenance deposits, from $41.9 million in the year ended December 31, 2024 to $10.3 million in the year ended December 31, 2025; and proceeds of $58.9 million from the sale of shares in a joint venture (TechOps MX) in the year ended December 31, 2025. These improvements were partially offset by an increase of $12.2 million in intangible asset additions to $41.3 million in 2025 from $29.1 million in 2024.
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Net cash flows used in financing activities
We recorded net cash used in financing activities of $496.2 million in 2025, as compared to $920.1 million in 2024, representing a decrease of $423.9 million. This decrease is primarily due to net cash received through our initial public offering in the year ended December 31, 2025 of $165.6 million; a decrease of $613.9 million in cash used for the capital stock decrease, from $818.5 million in the year ended December 31, 2024 to $204.6 million in the year ended December 31, 2025; and a decrease in cash flows used for the repayment of loans to $156.2 million in the year ended December 31, 2025, as compared to $840.9 million paid in the year ended December 31, 2024. Additionally, the absence of a contingent consideration payment in 2025 (compared to a $24.1 million payment in 2024) further improved cash flows. The cash obtained from financing activities was partially offset by a decrease in new loans to $64.6 million in new loans obtained in the year ended December 31, 2025, compared to an aggregate principal amount of $1,110 million in connection with the issuance of the 2029 Notes and 2031 Notes in the year ended December 31, 2024; and an increase in payments of lease liabilities to $365.6 million in the year ended December 31, 2025 from $346.5 million in the year ended December 31, 2024.
For a comparison of our cash flows for the years ended December 31, 2024 and 2023, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Cash flows,” in the prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act, relating to the registration statement on Form F-1 (File No. 333-279379).
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Indebtedness
The following table presents a summary of our loans and borrowings as of the dates indicated:
As of December 31,
Instrument Currency Interest Rate Maturity 2025 2024 2023
(in millions of U.S.$)
Loan secured by the collection of credit card sales in the USA(1) USD SOFR + 325 basis points 2024 — — 63.1
CEBURES guaranteed by the collection of credit card sales in Mexico(1)(2)(5) pesos TIIE + 168 basis points 2025 — 52.6 143.9
Loan for maintenance services and spare parts provided or guaranteed by EXIM Bank USD 2.33 % 2024 — — 2.1
Exit financing notes due 2027(4) USD 8.50 % 2027 — — 662.5
2029 Notes(3) USD 8.25 % 2029 500.0 500.0 —
2031 Notes(3) USD 8.625 % 2031 610.0 610.0 —
Total loans 1,110.0 1,162.6 871.6
Finance lease supported by EXIM guarantees USD 2.33 % 2029 55.2 71.4 87.1
Finance lease supported by EXIM guarantees USD 2.54 % 2027 14.0 24.9 35.5
Finance lease supported by EXIM guarantees(2) USD 1.37 % 2026 2.8 11.2 19.5
Finance leases of flight equipment USD 3.16 to 3.57 % 2024 — — 1.5
Financial lease of flight simulator USD 6.88 % 2029 5.0 6.1 7.0
Total financial leasing 77.0 113.6 150.6
Lease liabilities (IFRS 16) 2,879.1 2,438.3 2,217.0
Total lease liabilities 2,956.1 2,551.9 2,367.6
Total loans and borrowings 4,066.1 3,714.5 3,239.2
(1) This loan contains a financial covenant related to collections coverage ratio which represented their payment guarantees.
(2) We entered into interest rate swaps that effectively allowed us to pay fixed rates in connection with these obligations in 2023. See Note 28 to our audited consolidated financial statements.
(3) Senior secured notes issued by Grupo Aeroméxico and guaranteed by Aeroméxico, Aeroméxico Connect and Aeroméxico Cargo.
(4) Senior secured notes issued by Grupo Aeroméxico and guaranteed by Aeroméxico, Aeroméxico Connect, Aeroméxico Cargo and PLM.
(5) CEBURES means Mexican bonds (Certificados Bursátiles) and includes several series of short-term securities.
In September and October 2023, we repurchased and cancelled aggregate nominal amounts of $61.1 million and $38.9 million, respectively, of our exit financing notes due 2027. On November 14, 2024, we (i) issued the 2029 Notes with aggregate principal amount of $500 million and the 2031 Notes with aggregate principal amount $610 million and (ii) redeemed in full our exit financing notes due 2027.
As of the date of this annual report, we are in compliance with the covenants under our loans and borrowings.
Senior Secured Notes due 2029 and 2031
Grupo Aeroméxico issued $1.1 billion first-lien secured notes on November 14, 2024. The first-lien secured notes are guaranteed by Aeroméxico, Aeroméxico Connect, Aeroméxico Cargo and PLM. The Bank of New York Mellon acts as trustee under the first-lien secured notes indenture and UMB Bank National Association is the collateral agent.
Our obligations under the first lien notes are secured by pledges over substantially all of our assets, including our equity interests in certain owned aircraft and aircraft engines, aircraft spare parts, real estate, shares in our subsidiaries, intellectual property and the beneficial interest in certain trusts that own these and other assets, subject to certain customary exceptions.
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The 2029 Notes accrue interest at an annual rate of 8.250%, payable semi-annually in arrears, and mature on November 15, 2029, and the 2031 Notes accrue interest at an annual rate of 8.625% payable semi-annually in arrears, and mature on November 15, 2031.
The notes are redeemable at our option, in whole or in part, at any time on or after, in the case of the 2029 Notes, November 15, 2026 and, in the case of the 2031 Notes, November 15, 2027, each a first call date, at the redemption prices described below if redeemed during the twelve-month period beginning on November 15 of the years indicated below, together with accrued and unpaid interest, if any, to, but not including, the date of redemption:
2029 Notes 2031 Notes
Period Redemption Price Period Redemption Price
2026 104.125% 2027 104.313%
2027 102.063% 2028 102.156%
2028 100.000% 2029 100.000%
In addition, we may redeem:
• at any time prior to the applicable first call date, up to 40% of the original principal amount of each series of the notes with the proceeds of certain equity offerings at a redemption price equal to, in the case of the 2029 Notes, 108.250%, and in the case of the 2031 Notes, 108.625%, of the principal amount of such notes, plus accrued and unpaid interest thereon, if any, to, but not including, the date of redemption;
• prior to the applicable first call date, during any 12-month period, up to 10% of each series of notes of the corresponding series of notes at 103% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of redemption;
• at any time prior to the applicable first call date, some or all of either series of the notes at a price equal to the greater of (i) 100% of the principal amount of such notes and (ii) the present value at such redemption date of the applicable series of notes at its first call date plus all required interest payments that would otherwise be due to be paid during the period between the redemption date and the first call date, plus, in either case, accrued and unpaid interest to, but not including the date of redemption; and
• each series of the notes, in whole but not in part, at a redemption price equal to 100% of their principal amount, plus any accrued and unpaid interest, if any, to, but not including, the date of redemption, and additional interest thereon, if tax laws currently in effect are modified and the change results in Grupo Aeroméxico and the guarantors being obligated to pay additional amounts in excess of those attributable to the withholding tax rate currently in effect, with respect to interest and interest-like payments on the notes.
The first-lien secured notes contain customary covenants for secured debt transactions, including limitations on our ability to:
• merge with or into another entity;
• undergo a change of control;
• incur additional indebtedness and liens;
• make asset sales;
• enter into sale leaseback transactions; and
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• make investments, dividend and similar payments and prepayments of certain junior lien and unsecured indebtedness.
We are also obligated under the terms of the notes to:
• maintain the collateral securing the notes; and
• comply with reporting requirements in connection with our financial and operational results.
The first-lien secured notes also include customary events of default, including failure to pay principal or interest on the notes, breach of a covenant, cross defaults to certain other debt obligations, bankruptcy or insolvency of Grupo Aeroméxico or any of the guarantors and defects on the collateral securing the notes. An uncured event of default may lead to acceleration of the debt and other remedies against us.
For further information about risks relating to our fixed financing obligations, including our obligations under the first-lien secured notes, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—We have significant fixed obligations, which may increase in the future.”
Revolving Credit Facility
On August 26, 2024, Aeroméxico entered into a revolving loan agreement for a senior secured revolving credit facility in an aggregate principal amount of $200 million with BBVA México, as sole bookrunner and lead arranger; BBVA México, S.A., Institución de Banca Múltiple, Grupo Financiero BBVA México, ING Bank N.V., Barclays Bank PLC, Banco Latinoamericano de Comercio Exterior, S.A., Banco Nacional de México, S.A., integrante del Grupo Financiero Banamex, JPMorgan Chase Bank, N.A. and Morgan Stanley Senior Funding, Inc., as initial lenders; Grupo Aeroméxico and Aeroméxico Connect, as guarantors; and BBVA México, as administrative agent. Pursuant to the loan agreement, the per annum interest rate is 2.85% per annum plus one-month SOFR. The availability period of the revolving credit facility expires on May 25, 2027, and the outstanding loans under the revolving credit facility must be repaid in four equal monthly instalments on May 26, 2027, June 26, 2027, July 26, 2027 and August 26, 2027. As of December 31, 2025, the Group had not utilized this credit facility.
We may terminate or reduce the unused commitments upon three business days’ written notice to the administrative agent.
The loan agreement also establishes customary covenants applicable to revolving credit facilities, including requirements related to enforceability, maintenance of corporate existence, payment of taxes, ranking of the obligation and maintenance of properties and insurance.
The revolving credit facility is secured by certain collateral transferred to a Mexican trust, including collection rights derived from affiliation contracts related to certain credit card payments processed in the United States and Mexico. As a result of recent orders issued by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network, or FinCEN, against CIBanco related to alleged deficiencies in anti-money laundering controls, we replaced CIBanco with Banco Invex, S.A., Institución de Banca Múltiple, Invex Grupo Financiero as trustee of this trust during the first quarter of 2026. For more information about the sanctions see “Item 3. Key Information—D. Risks Relating to Our Business and Industry—Recent U.S. administration actions, including FinCEN orders against Mexican financial institutions, sanctions on certain Mexican criminal organizations and individuals, and new visa-related fees, could adversely affect our operations, financial performance, and reputation.”
Commitments and contractual obligations
We have contractual obligations comprised of payment of debt and interest, aircraft leases and other lease arrangements. The following table includes our contractual obligations as of December 31, 2025, for the periods in which payments are due:
1-12 months 1-2 years 2-5 years 5 years
Loans in dollars (fixed rate)(1) 0.0 0.0 1,098.9 0.0
Financial leases 31.6 39.6 5.8 0.0
Leases-liabilities 418.9 799.6 1,326.9 333.7
(1) Loans are presented net of borrowing costs of $11.1 million.
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Capital expenditures
The following table shows certain summary information about our main capital expenditures as of the dates indicated:
For the Year Ended December 31,
2025 2024 2023
(in millions of U.S.$)
Right-of-use 4,240.4 3,514.7 3,062.0
Major maintenance 1,110.9 1,153.1 735.1
Flight equipment 252.5 252.5 212.4
Rotable spare parts and accessories 122.2 111.9 101.4
Improvements of flight equipment 82.8 68.8 71.9
Machinery and equipment 43.8 42.1 46.8
Lease-hold improvements 65.7 52.6 68.7
Furniture and computer equipment 27.0 25.7 24.7
Construction 22.4 22.4 22.4
Ground and platform equipment 20.6 19.8 17.4
Transportation equipment 12.0 10.2 10.6
Other equipment 33.3 31.9 32.8
Work in progress 31.2 27.4 13.2
Land 13.3 13.3 13.3
Total 6,078.1 5,346.4 4,432.7
We committed to an investment plan to expand our fleet and improve our customer service. We have grown our fleet by 29% between 2021 and 2025 and we expect our fleet size to remain stable between 2026 and 2027. Through upgauging, we have also grown our overall capacity, measured based on the total number of seats in our fleet, by 40% between 2021 and 2025 and we anticipate maintaining this capacity level through 2027.
Off Balance Sheet Arrangements
As of December 31, 2025, we had no off-balance sheet arrangements.
C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
Intellectual Property
We believe that our intellectual property rights, including our trademarks, trade names, service marks and domain names, are critical to the operation and development of our business. Our trademarks, trade names, service marks and domain names allow our customers to clearly identify us as the source of the services, thereby distinguishing our services and products from those provided by our competitors in the market. Our most relevant trademarks include our “Aeroméxico” trade name, which has been recognized by the Mexican Institute of Industrial Property (Instituto Mexicano de la Propiedad Industrial), or IMPI, as a famous brand (marca famosa), our Eagle-Knight logo, which consists of a design with the head of a man and an eagle, and our trade names such as “Aeroméxico Vacations,” “Aeroméxico Connect,” “Aeroméxico Cargo” and “Aeroméxico Servicios.”
As of December 31, 2025, we owned 807 registered trademarks, in different jurisdictions, including 25 commercial notices. We have in-license certain trademarks and service marks in relation to the SkyTeam alliance. We expect to continue having the right to use those trademarks and service marks as long as we are part of this alliance.
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The table below sets forth the number of trademarks we own by country or region:
Number of trademarks per country or region
Argentina 13
Benelux 4
Bolivia 7
Brazil 32
Canada 19
Chile 12
China 2
Colombia 4
Costa Rica 1
Dominican Republic 5
Ecuador 8
El Salvador 1
European Union 9
France 3
Germany 1
Honduras 6
Italy 3
Japan 2
Korea 1
Nicaragua 2
Guatemala 1
Panama 2
Paraguay 1
Peru 19
Spain 10
United States of America 25
Venezuela 15
México 599
Total 807
We also have registered certain internet domain names related to our business, which are important to our brand and marketing campaigns. Our most critical internet domains are: www.aeromexico.com and www.aeromexicorewards.com.
The current registration of these trademarks and domain names are effective for varying periods of time and may be renewed periodically, provided that we, as the registered owner, comply with all applicable renewal requirements including, where necessary, the continued use of the trademarks in connection with similar goods and services.
We also license certain software and other technology from certain third-party providers, including Sabre and Oracle. Such software is critical to the automated systems we rely on to plan and conduct our business, including our website, reservation system and fare management, maintenance systems, flight plans, systems to generate flight, crew roles and the accounting of revenue records.
For further information on the technologies and systems operated and provided by third parties and information on the risks related to our intellectual property, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—Our business relies on technology and automated systems, many of which are operated by third parties, and any failure of these technologies or systems could materially and adversely affect our business” and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—If we fail to comply with our obligations under license or technology agreements with third parties, or if we cannot license rights to use technologies on reasonable terms, we could be required to pay damages, lose license rights that are critical to our business or be unable to develop and offer new products in the future.”
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D. TREND INFORMATION
We believe that the main trends likely to impact our business over the coming 12 months include:
• volatility in the global oil supply and in jet fuel prices as a result of ongoing conflicts in the Middle East, primarily between the United States, Israel and Iran.
• continuation of passenger demand volatility, in line with general economic trends, and the growth of the Mexican passenger air travel market, which continues to present low levels of penetration despite demand recovery in the beginning of 2026;
• wage inflation;
• our fleet upgauging and expansion efforts; and
• continuation of the favorable commercial terms of certain aircraft leases, such as lower fixed rental fees, and long-term maintenance contracts that we previously renegotiated during our Chapter 11 restructuring and that remain in effect.
Jet fuel prices have sharply increased during the beginning of 2026. Jet fuel prices were 49.4% higher on average in March 2026 compared to March 2025, primarily as a result of the ongoing conflict in the Middle East, including the escalating hostilities involving the United States, Israel and Iran, and the continued threat of broader regional escalation. The conflict has adversely affected global oil supply and, consequently, our fuel costs, particularly as a result of Iran’s disruption of the Strait of Hormuz, through which a significant share of global seaborne oil exports pass. Although we do not have any direct operations in Israel, Egypt, Iran, Jordan, Lebanon, Syria, the West Bank or Gaza, we have been and will likely continue to be affected by the broader consequences of the ongoing conflict in the Middle East, including increased supply chain disruptions, reduced access to and higher prices of fuel and other effects on the global economy. We cannot predict the duration, escalation or resolution of the ongoing conflicts in the Middle East, and there can be no assurance that such conflicts will cease or that their impact on global oil supply and jet fuel prices will not worsen. As a result, we expect that such trends will likely have a material impact on our business over the coming 12 months and we are currently engaging in certain fuel recapture initiatives.
According to Diio, Mexico is one of the fastest growing aviation passenger markets. From 2014 to 2024, passenger demand grew to levels consistent with or superior to the pre-COVID-19 pandemic levels, fully returning to and exceeding pre-COVID-19 pandemic levels in 2024. Total passengers expanded at a 6.0% CAGR between 2014 and 2024, more than four times faster than Mexico’s real GDP CAGR of 1.3% over the same period, according to the World Bank. During the first half of 2025, passenger demand contracted amid uncertainty related to the U.S.’s immigration and trade policies. Demand recovered during the second half of 2025, and this positive trend continued into the early months of 2026.
Fuel price conditions in 2026 remain highly volatile, with external factors, including geopolitical developments, potentially affecting demand. Should these tensions ease within a reasonable timeframe, we would expect passenger demand to remain relatively stable, broadly in line with anticipated economic conditions in Mexico for 2026.
In July 2022, we acquired a controlling stake in PLM, the company that manages our frequent flyer program, Aeroméxico Rewards, formerly known as Club Premier. This acquisition has contributed to improve our customer experience, as we can now fully integrate Aeroméxico Rewards with our digital platforms. This full integration positions us well to benefit from Aeroméxico Rewards’ high margin co-branded revenue streams by promoting increased use of Aeroméxico Rewards credit cards and to enhance our customer loyalty.
Since our emergence from Chapter 11 proceedings, fleet upgauging to larger, more efficient aircraft has been a priority. We intend to continue to modernize and expand our fleet through aircraft upgauging and reconfiguration. We also intend to add new aircraft through new leases. We have continued our fleet modernization process by retiring older, less efficient aircraft and replacing them with modern, highly efficient Boeing 737 MAX aircraft, which has had a favorable impact on our CASM. In 2025, we added eight B737-8 MAX, nine B737-9 MAX and one Boeing 787 Dreamliner to our operational fleet. In 2024, we added four B737-8 MAX, three B737-9 MAX and two Boeing 787 Dreamliners to our operational fleet. In 2023, we added six aircraft to our fleet, consisting of one Boeing 787 Dreamliner and five Boeing 737 MAX aircraft to our operational fleet. We intend to continue the upgauging process and to utilize more highly efficient Boeing 737 MAX aircraft in place of the E190 aircraft, which we expect to further reduce our CASM. We also plan to upgauge our long-haul fleet over time to include a greater proportion of larger capacity B787-9 wide-body aircraft in order to meet demand for longer distance business and leisure travel.
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During the COVID-19 pandemic and in connection with our Chapter 11 proceedings, we renegotiated lease rates and terms for the remainder of our fleet to market terms, resulting in significantly lower ownership costs. We were able to renegotiate favorable monthly fixed rates that are in effect until the expiration of the renegotiated lease agreements. All of our renegotiated lease agreements included a PBH period, which allowed us to temporarily adjust our rent payments according to the usage of the aircraft, instead of monthly fixed rates. In addition, we negotiated lower monthly fixed rental rates that came into effect upon the termination of the relevant PBH period. We also renegotiated with our lessors aircraft redelivery costs incurred at the termination of the leases. The last of our PBH periods expired in December 2023, and we are now subject to the renegotiated fixed rental rates. The renegotiated leases expire gradually through 2034. The lower fixed lease rates, as well as our PBH arrangements which were previously in place, reduced our CASM. We also amended contracts with original equipment manufactures, or OEMs, to further reduce ongoing maintenance costs. In addition, we negotiated favorable conditions in connection with our CBAs, which were reflective of the economic conditions of our business and the industry at the time.
However, since the end of the COVID-19 pandemic, we have entered, and will continue entering in the future, into new aircraft leases on regular market terms, which typically include fixed, rather than PBH, payment requirements. In addition, we have renewed certain previously renegotiated maintenance agreements and all of our CBAs on standard terms following the expiration of the favorable terms negotiated during our Chapter 11 restructuring. Consequently, we no longer benefit from the more favorable provisions secured under some our restructuring arrangements. As these agreements continue to be renewed under normalized market terms, we anticipate that the associated operating costs may increase in future periods.
For a detailed discussion of material recent trends in production, sales and inventory, the state of the order book and costs and selling prices since the latest financial year, as well as of any known trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition, please see “Item 5. Operating and Financial Review and Prospects—A. Operating Results.”
E. CRITICAL ACCOUNTING ESTIMATES
In preparing our audited consolidated financial statements, we made judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
We base our judgments, estimates, and assumptions on historical and forecast information, as well as regional and industry economic conditions in which we or our customers operate, changes to which could adversely affect our estimates. Although we believe we have made reasonable estimates about the ultimate resolution of the underlying uncertainties, no assurance can be given that the final outcome of these matters will be consistent with what is reflected in our assets, liabilities, revenues, and expenses. Actual results may differ from those estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
The following are our critical accounting policies and their cross references to the notes to our audited consolidated financial statements included in this annual report:
Useful Lives of Property and Equipment. The useful life is the period over which an asset is expected to be available for use by an entity. The estimation of the useful life of the assets is a matter of judgment based on our experience with similar assets. We perform on a regular basis an analysis which is based on each asset’s estimated useful life of the equipment, including major maintenance costs, requiring significant judgement to determine possible adjustments on either the remaining life of the asset or if applicable on the remaining lease term of such asset. When parts of an item of property and equipment have different useful lives, they are accounted for as separate items of property and equipment. Assets leased under finance leases are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that we will obtain ownership by the end of the lease term. Our management’s judgment is required, for example, to determine the useful lives on major maintenance depending on the specific overhaul that may vary from 18 months to eight years, but can be updated based on fleet plan adjustments, hours/cycle of actual usage, manufactures’ guides or redelivery conditions agreed with lessors. We exercise judgment to determine the usage level estimated for each equipment, and our estimates may vary depending on revised utilization estimates. For example, considering the remaining net major maintenance capitalized balance as of December 31, 2025, the annual depreciation expense would have ranged between minus $11.2 million to plus $10.0 million if the utilization of the actual fleet as of December 31, 2025, had increased or decreased within the 10% range, keeping all other variables constant.
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See Notes 3(e) and 15 to our audited consolidated financial statements.
Incremental Borrowing Rates to estimate the right-of-use assets and lease liabilities. At commencement of a lease, we measure the lease liability at the present value of the lease payments not yet, paid, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, our incremental borrowing rate (“IBR”). This rate comprises significant assumptions such as references rates, credit ratings, country risk and specific adjustments related to the nature of the leased assets. We determine our IBR by obtaining interest rates from various external financing sources and making certain adjustments to reflect the terms of the lease and the type of asset leased. As of December 31, 2025, the Group recognized additions of right-of-use assets related to flight equipment of approximately $854.4 million and corresponding lease liabilities of approximately $806.3 million. We exercise judgment to determine the significant assumptions, reference rates, credit ratings, country risk and adjustments related to the nature of the leased assets, and the sensitivity of the present value of the lease payments to possible changes in the IBRs.
See Note 3(f) to our audited consolidated financial statements.
Impairment. Impairment is the extent to which the ability to generate economic benefits provided by an asset have diminished due to changes in economic or other conditions and involves assessments of recoverability. The amount of an asset may be increased to reflect the cost of additions and enhancements or other events. We determine whether an asset has become impaired and apply relevant impairment tests if applicable. A high degree of uncertainty is involved in estimating the recoverable amounts resulting from future cash flows of the cash-generating units.
For our impairment tests, we estimate the net present value of annual discrete cash flows and the net present value of terminal value for our assets. Our estimates may vary depending on the actual performance of our business and market conditions that are recurrently monitored. We do not foresee market conditions that could warrant a contingency over the threshold utilized in our calculations. The percentage by which the fair value of our assets subject to impairment testing exceeded their carrying value, as of December 31, 2025, was 386.3%. There are no other triggering events that may affect other intangibles.
For the year ended December 31, 2025, we recognized an impairment reversal of $3.7 million. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount, and is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
See Notes 3(i) and 17 to our audited consolidated financial statements.
Revenue Recognition. We recognize revenue to depict the transfer of promised services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those services. Ticket sales are initially recorded as an air traffic liability and are recognized as passenger revenue, net of airport charges, when the service is rendered. The liability is reduced by transportation services and refunds of expired tickets. Passenger revenue includes airfare, income for expired tickets, income for ancillary services and the decrease in compensation costs paid to passengers and the cost from accumulated frequent flyer program.
Breakage revenue from expired tickets is recognized as an ancillary revenue based on the scheduled flight date and the terms and conditions of each ticket in which we utilize historical experience with refundable and non-refundable tickets and other patterned facts.
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Our management’s judgement is required when we need to complement our historical experience when we face unprecedented circumstances, as was the case during the COVID-19 pandemic and related behavioral changes, when we modified rules to extend the utilization of tickets, which caused certain breakage adjustments. In 2025, unused ticket breakage recognition represented 7.0% of the total passenger revenue. This percentage can significantly be affected by our commercial policies. As an example, during the years of the COVID-19 pandemic our breakage percentage went down as low as 0.26% of the total passenger revenue. In 2025, unused ticket breakage was $342.2 million but if the low COVID-19 pandemic breakage percentage had been used, the amount would have been $12.6 million.
Cargo revenue is recognized when the service is rendered, and other revenues are recognized when the services are provided.
In connection with our frequent flyer program, the fair value attributed to the points earned by members is accounted for as a deferred revenue and recognized as revenue on redemption of the points by the members. The fair value of the award is determined based on stand-alone sale prices of the respective awards in commercial transactions. The amount of revenue recognized is based on the number of points redeemed in a period in relation to the total number expected to be redeemed, which is a factor used in our estimate for breakage. Breakage represents the estimated points that are not expected to be redeemed by the program members. Breakage is estimated based on the terms and conditions of membership and historical accumulation and redemption patterns, as adjusted for changes to any terms and conditions that may affect members’ redemption practices. We believe that a one basis point variation in our breakage estimate associated with our frequent flyer program could have resulted in a total impact of $2.9 million on income before income tax recognized in 2025.
See Note 3(l) to our audited consolidated financial statements.
Leased aircraft return provisions. Provisions are recognized when we have a present legal or constructive obligation as the result of a past event, the fulfilment of the payment obligation is probable, and a reliable estimate of the amount of the obligation can be made. The amount to be recognized as provision corresponds to our best estimate of the expenses that will be necessary to meet the obligation at the end of the reporting period. Our aircraft lease contracts establish certain conditions in which flight equipment shall be returned to the lessor once the contractual period terminates. Our calculations for this provision include estimated incurred costs, which might be upscaled depending on whether we have maintenance contracts with third parties or perform these services internally. Other management judgment criteria include different variables, such as the major maintenance costs to be incurred on projected overhauls, fleet plan annual adjustments, future accumulated hours/cycles and the adequate level of maintenance reserves paid to lessors, all of which are settled between us and the relevant lessor at the termination or expiration of each leased contract. As an example, considering the actual contractual leases as of December 31, 2025, we maintained in total 165 aircraft in our operating fleet. We had 163 planes which were operational and leased and two company-owned planes. We also leased one additional plane which began operating in the first quarter of 2026. As a result, we had a total of 164 leased aircraft as of December 31, 2025. As of December 31, 2025, we also had 39 total engines, 36 of which were under lease arrangements, with the last lease expiring in 2037. Within a 10% range increase or decrease in the utilization of the actual fleet as of such date, the redelivery long-term cost expense on an annual basis during this period would have ranged from between minus $5.7 million to $59.7 million per year, depending on the specific return conditions of each aircraft or engine. This variance might be reflected through depreciation expenses and financial costs, if major maintenance expenses could be captured within the same period.
See Note 24 to our audited consolidated financial statements.
Recent Accounting Pronouncements
We do not have any transactions that are affected by any newly effective accounting standards and amendments. See Note 4 to our audited consolidated financial statements for a description of recent accounting pronouncements and their expected impact on our results of operations and financial condition.
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