Operator
Good morning and welcome to AeroMexico's third quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. There will be a question and answer session at the end with instructions given at that time. For the webcast participants, you may submit questions at any time during the call using the Ask a Question section on the webcast. As a reminder, today's conference is being recorded. Now I would like to hand the conference over to Ms. Lucero. Medina, Head of Investor Relations. Ms. Medina, you may begin.
Good morning, everyone. Joining me today to discuss our results are Andres Comesa, Chief Executive Officer, Aaron Murray, Chief Commercial Officer, and Ricardo Sanchez-Baker, our Chief Financial Officer. Before we get started, I would like to take this opportunity to remind you that during the course of this call, we will present results that are based and our unnoticed consolidated financials. Accordingly, the financial results discussed today are based on information available to us as of the date of this call and are not a comprehensive final statement of our financial results for any period presented. We may make forward-looking statements within the meaning of the U.S. Private Securities Mitigation Reform Act regarding future events and our company's future performance. We caution you that several important factors could cause actual results to discern materially from any plans and expectations expressing this call, including the risk factors disclosed in our SEC filings. During this call, we will present certain non-IFRS financial measures. We have included a reconciliation and explanation of adjustments and other considerations of our non-IFRS measures to the most comparable IFRS measures in earnings relief. Both our call and the earnings relief are available on our website. It is now my great pleasure to turn the call over Thank you, Lucero, and good morning, everyone.
I appreciate you joining us today to discuss our third-quarter 2026 results. We delivered strong third-quarter results, reflecting once again the resilience and unique strengths of Ida-Mexico's business model. These results also demonstrate the significant progress we have made in recent years to build a stronger and more flexible company better position to navigate periods of uncertainty including to raise high clean cost environments i would like to thank the entire aeromexico team for their commitment and discipline in executing through a challenging environment by putting our customer first while maintaining strong cost control the team continues to protect the quality of our service and capitalize on attractive revenue opportunities edit marketing reached a strong 12 percent supported by record quarterly revenue that came in above the midpoint of the june guidance range in a quarter defined by higher than expected and volatile fuel prices delivering a double digit edit margin is a significant achievement it It demonstrates the strength of our business, our ability to capture premium revenues, and the discipline execution of our teams. Demand remains healthy, supported by a successful peak season that extended through September and delivered outstanding growth factors. We also continue to see strong contributions from our premium products and loyalty programs, which enhance our offering and reinforce customer preference for Aerometrico. Premium revenue represented 42% of total revenue, up one percentage point year-over-year, while loyalty penetration reached 40%, an 8-point increase versus last year. Total revenue grew 14% year-over-year, driven by premium and other revenue streams, including charitable and loyalty. Together, these factors, along with cost-revenue management initiatives, supported our performance during the quarter. Capacity increased by around 1% year-over-year in the first few, and as the temporary negative impact of the World Cup in June and July normalized, we saw a clear improvement in those factors. August reached 90%, and September recorded 87%, which is a very strong level for a shoulder season months following the summer peak more importantly forward cooking remains strong supporting a constructive outlook for the reminder of the year this gives us confidence that underlying demand trend remains solid and that our capacity is well aligned with market conditions when we grow more than upset the year over the increasing fuel costs despite yet fuel prices being generally above our guidance. Fuel costs increased by approximately $170 million year over year in the third queue, including nearly $93 million above the guidance we shared with you in early July. However, running growth was not enough to offset the combined increase in fuel and non-fuel costs. In addition to the higher than expected fuel expense, we We experienced an anticipated increase in non-fuel costs derived from inflationary pressures and unexpected cost pressures resulting from the depreciation of the Mexican pesos. Even so, our teams responded to great initiatives, fuel recapture actions, and discipline capacity deployment, enabling us to deliver a very strong level of profitability in the quarter. This third cue also shows early times of a better cost-excuse trajectory. Some pressures, including FX, started to normalize and our teams continue to manage the cost-based with discipline. Looking ahead, as operating leverage yields, casting excluding fuel is expected to continue to improve. This is important because it demonstrates that beyond the temporary impact of fuel, we believe that the underlying business is moving decisively in the right direction, with improving cost momentum and a stronger foundation for sustainable profitability. As a result of this structure of resilience, we ended the quarter with a cash position above the level reported in the third quarter of 2025. Financial debt, including leases, continued on the downward trajectory while we maintained our investment program without raising additional debt. Our focus remains on investing for the future while protecting liquidity and preserving the financial strength of the business. Our network will continue to grow through the recently announced groups launching in 2027, including Mexico City to Milan, Guadalajara to Paris, Nassau, and Montego Bay. This expansion reflects our confidence in the long-term demand outlook and our DTP in approach to growth, adding capacity selectively in markets where we see attractive opportunities to generate profitable returns. The U.S. Department of Transportation decision immediately revoked its prior order disapproving certain schedules by Mexican carriers marks a very positive development for Aida Mexico. It removes an important restriction on our ability to add frequencies and launch new schedule of services between Mexico City and the United States, subject to applicable regulatory requirements. This gives us greater flexibility to capture attractive growth opportunities, strengthen our trans-worlder network, and offer our customers more connectivity between Mexico and the United States. Taking care of our customers also means delivering a reliable operation, every day in every market we serve. This is something our teams have been focused on and the results are cleared. Syriam once again recognized out of Mexico as the most on-time airline in the world during the third quarter. Together with our performance in the first and second quarters, this positions us very strongly to receive these recognitions for the third consecutive year, a feat that no other airline has achieved in history. Building on our strong third-quarter resource and solid outlook, we plan to remain focused on operating reliably, protecting revenue performance, managing costs with discipline, and further strengthening our balance sheet. Ricardo will provide more detail on our four-two and four-year outlook shortly. Before that, I want to highlight the positive opportunities ahead with receiving demand and a favorable fair environment supporting continued revenue momentum. We also see meaningful operating leverage and better in our existing fees. At the same time, we anticipate continuing to invest selectively in customer experience and in the networks that make Cairo Mexico the preferred choice for travelers. We are confident that this combination of strong execution, discipline growth, and a resilient business model will continue to differentiate Aeromexico and create long-term value for our customers, employees, and shareholders. With that, I will turn it over to Adam to discuss our commercial performance in more detail. Thank you very much.
Thank you, Andres, and good morning, everyone. I want to thank the entire Aeromexico team for their hard work and dedication and our customers for their continued loyalty. As Andres mentioned, we delivered the strongest quarterly revenue performance in Aeromexico's history with total revenue of $1.62 billion, up 13.6% year-over-year. This performance reflects strong demand across the network and the benefits of the commercial initiatives we are executing. International revenue showed strength across all entities, increasing 17.4% year-over-year, led by long-haul markets in the U.S. region. Growth in the U.S. region was especially notable given the high comparison base as last year's third quarter marked the inflection point in U.S. demand recovery. Regarding domestic, performance strengthened throughout the quarter as we distanced ourselves from the World Cup, resulting in domestic revenue growing 6.7% year-over-year. Turning to commercial initiatives, Aeromexico Rewards continues to be an important driver of customer engagement and revenue quality. As Andres mentioned, program participation reached a new record in the third quarter of 40%, up 8 points year-over-year and 19 points since the program's reacquisition and rebranding in 2023. Redemption revenue grew 27% year-over-year, two times more than total revenue growth for the quarter as investments in the program continue to bring value to customers. Regarding modern airline retailing, our redesigned branded fare structure is driving significant incremental revenue by better aligning our product offering with different customer needs and willingness to pay. This enables us to more effectively position our premium offering while expanding our ability to compete for more price-sensitive demand. These capabilities continue to support growth in our direct online channel, where in the third quarter, direct online share remained at an all-time high of 48%, up two points year-over-year, and 23 points versus 2019. These initiatives are giving us greater control over how we present, differentiate, and monetize our products, enabling more disciplined execution of our premium strategy while giving us the flexibility to compete across a broader range of customer segments. Looking ahead to the fourth quarter, Ricardo will provide details of our guidance, but we continue to see strong demand trends across all geographies. In September, our fall sales campaign generated 45% more revenue than the previous year. In response to rising fuel costs, Aeromexico remains focused on fuel recapture initiatives, and maintaining flexibility and capacity management. Regarding capacity, fourth quarter growth will be driven primarily by wide bodies as Aeromexico continues expanding its long-haul network in Europe and Asia, enabled by recent 787 deliveries. This wide body growth reflects a continued stretching of demand in traditionally weaker periods, particularly in European markets, and includes the extension of Monterey-Paris to year-round and the annualization of our recently launched Mexico City Barcelona service. In addition, in the fourth quarter, we plan to grow domestic capacity between 3% and 4%, enabled by the increase in Mexico City slots from 44% to 46% per hour. We expect this growth to enhance our leading domestic position at our hub. In closing, we believe Aeromexico is well-positioned to deliver a strong finish to the year, supported by continued revenue momentum, growing customer engagement, and a disciplined approach to growth. I'll now turn the call over to Ricardo.
Thank you, Aaron, and good morning, everyone. First, I would like to join Andres and Aaron in thanking the entire AroMexico team for its outstanding efforts and execution during the quarter. Our results reflect the team's ability to remain focused, responsive, and busy teams while navigating significant fuel and vital identity foreign exchange movement, and a more demanding than expected cost environment. Our results also demonstrate the trends and resilience of our business model and the durable structural advantages we have viewed over time. In the third quarter, total capacity measured in AFMs increased 1% year-over-year, generally in line with our guidance. We managed capacity carefully prioritizing profitability. International A&M split 2%, while domestic A&M declined 2%, aligning supply with demand. As Alan mentioned, revenue reached $1.6 billion, up 40% year-to-year, and a record for any quarter. Thrustum increased 12%, given primarily by passing their revenue, and cargo, and other commercial interest. Total revenue increased by $194 million, more than expecting the $171 million year-over-year their increase in yield prices. This is some revenue performance was given by resilient demand, strength in the international market, targeted revenue management initiatives, and continued growth in our premium products and the energy program. The result was particularly significant given that fuel costs were approximately a million above the level contemplated in the guidance provided task force. In the third quarter of 2026, Aromexico-based authority program breakage, the first such alignment since 2018. This update resulted in the recognition of $49 million in revenue for the period, together with an adjustment to our preferred liability. More importantly, this updated pre-catch establishes the very time that we expect to drive sustained growth in our annual royalty revenue moving forward. While revenue growth fully affected a year-on-a-year increase in yield prices, the combined impacts of higher field costs, anticipated increases in our operating costs, and the impact of the stronger Mexican peso continues to pressure profitability. Despite these broader cost pressures, out-discipline execution, and the strong revenue performance supported an added margin that remains among the strongest in the industry. Total operating expenses increased 22% year-over-year, finally due to a 58% increase in field expense. Our fuel prices average nearly $4 per gallon, compared to $250 in the third quarter of 2025. Our efficient fuel helps mitigate the impact with fuel consumption down 2% and fuel bonds per EFM including 3%. Excluding fuel, operating expenses increase 10%, primarily reflecting the stronger Mexican pressure, inflationary pressures, and costs associated with fuel growth. Chasm XU increased 7% over the year, a clear improvement over the approximately 15% increased recorded during the first half of the year. This progress reflects continued core discipline, operating efficiency, and a more stable foreign exchange environment. As we continue to capture operating leverage opportunities by generating more assets with our existing assets, we expect our Chasm XU to turn more stable. Adjusted EBITDA amounted to $389 million, representing a strong 24% margin, while operating income reached $190 million, resulting in a robust 12% operating margin. The strength of our financial results underscore the structural durability of our business model and our ability to preserve healthy profitability despite a challenging cost environment. In our view, however, the most important financial results of the first nine months of the year has been our strong cash flow generation. Our Mexico generated $542 million in net cash flow operating activity through September 30, 2036, enabling us to fund our planned investments for continuing to reduce financial debt. During the third quarter, we repaid an additional $7 million of debt, further strengthening our balance sheet despite elevated to prices and other cost pressures. We ended the period with $965 million in cash and cash equivalents of 31 million year-over-year. We also renewed and obscized our revolving trade facility from 200 million to 250 million, bringing total liquidity to 1.2 billion, equivalent to 21% of last 12-month revenue. This liquidity position provides a strong foundation to continue investing in the business while preserving financial flexibility. Looking ahead, our updated guidance reflected assumptions for field prices, foreign exchange, and inflation-related expenses. For the fourth quarter, we expect capacity to increase between 7% and 8% year-over-year. The breaking leverage that began to emerge in the third quarter should become more visible in the fourth quarter and continue to deal with the years ahead. We expect fourth quarter revenue growth of approximately 14% to 16%. This also reflects robust demand, the strength of our network, and distribute commercial execution. With strong demand, a stronger revenue base, and higher utilization of our existing fees, we expect to generate more revenue and use our existing costs more efficiently, supporting the stronger margins of our time. More importantly, we expect to achieve this without adding incremental fees or taking on additional debt to fund growth. We anticipate fourth quarter cash-on-the-fields to remain global flat year-over-year. For the fourth quarter, we expect an adjusted EBITDA margin between 19.5% and 21.5% and an operating margin between 7.5% and 9.5%. Taken together, this is a full year 2022 capacity growth of approximately 2% to 3% and year-over-year revenue growth of approximately 13.5% to 14.5%. We expect full year adjusted EBITDA margin between 21.5% and 22.5% and full year operating margin between 8.5% and 9.5%. Our guidance assumes an average all-in fuel price of approximately $4.5 per gallon for the full quarter, and an exchange rate of approximately $18 pesos per dollar. We cannot predict that fuel prices will moderate, but we believe they will eventually increase. When that happens, our ability to capture premium revenue, together with our operating leverage and better in the existing platform that we have should be able to unlock additional profitability opportunities. In the meantime, we remain focused on changing our Mexico in a challenging environment. Our structural advantages and strong cash flow generation should continue to reinforce our competitive position, and we believe that the gap between our Mexico and its competitors should continue to widen in the following months. With that, we will open now the call for questions.
Operator
Thank you. To ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. We ask that you please limit yourselves to one question and one follow-up. Please stand by while we compile our Q&A roster. Our first question is going to come from the line of Dwayne Finnegarworth with Evercore. Your line is open. Please go ahead, sir.
Hey, good morning. Thank you. can you just remind us just play back for us the impacts from changes in FX our understanding is a modestly softer peso will lower or help your unit cost slightly lower your unit revenue but be net neutral or maybe even a slight tailwind to margins can you just speak just remind us if we're now say modeling 18 or 18 and a half instead of 17, how that impacts your revenue, costs, and margins.
Speaker 8
So as you know, we have a natural hedge on the currency. So basically, this movement does not affect the P&L. However, they have an impact on demand, like a second-order impact, where a stronger peso you know, means, you know, stronger demand for Mexicans flying abroad and the other way With the potential of these levels around, you know, between 18 and 19, we feel that, you know, the demand for traveling from Mexicans abroad continues to be solid. We are in a good spot. Obviously, when the peso was, you know, below 17 pesos per dollar, it was even stronger during the summer. But again, we see at these levels of the currency, very strong demand for Mexicans traveling abroad. So a weaker peso that we're expecting versus the July guidance means lower costs in dollars and lower revenues in dollars. So even though we kept, you know, the total revenue projections in the guidance flat versus what we were expecting in July, we see there is an impact of this weaker peso, which is equivalent to around 2 percentage points. So that's really, really important. If you consider that, the expected growth in revenues for the 4Q is between 16 and 18 versus the 4Q of 2025. So it's very, very solid, and we continue to take additional steps to strengthen revenue. But again, the new level of jet fuel that we are seeing, for example, it's relatively new. It's the past three weeks or so with jet fuel approaching $5 per gallon. It's new. It's a new noise. We are, as Ricardo explained for the water, expecting a way higher jet fuel price, which is around $170 million of pressure, and we are acting. So hopefully with these actions plus what I adjusted for this special effect, we can even get closer to a growth rate of around 20% in total revenues for the quarter. Again, too soon to say today, but we're working in that direction. Ricardo? Just to complement Andres, Andres talked about the revenue side. Looking at the cost side, if you look at the anticipated or estimated CASCX fuel for the full fuel versus the previous island, what we see is that CASCX fuel can be better in around 2 to 3 percent, given also this FX impact, so yeah, we have some impact on the learning side, but that's already described, and on the cost side, we see some positive impact on CASCX fuel.
Yeah, just to follow up kind of on fuel recapture initiatives, you know, we've obviously been a difficult year in terms of needing to recapture cost of fuel. We have had a lot of success, though, and even in recent weeks, continue with the rising fuel to find, you know, regional success in passing those costs on. So our revenue guidance is in no way an indication that we feel like we've hit the end of that. But in fact, with all these initiatives that have been deployed this year, we haven't seen any signs that there's any, you know, cracks in demand or that maybe we've gone as far as we can. So I think implicit in our guidance is not too much more recapture for the quarter, but we do feel like as we deploy those initiatives, that could be upside.
Thank you for that detailed response. And then just for my follow-up, can you speak to competitive capacity trends that you're seeing here into the fourth quarter? It does look like the capacity picture gets a bit tighter sequentially from 3Q to 4Q domestically in Mexico. I wonder if you could speak to that as well. Thanks for taking the questions.
Speaker 8
Well, what we are seeing, if you look at, you know, the capacity projections for the other two carriers in Mexico, they are down. They have been, you know, revised down, particularly for one of them, which is, you know, even projecting high-changed digit contractions for the first queue. So, we are not anticipating pressures on the capacity side of the domestic market. There is an increase in the slots in Mexico City that are mentioned from 44 to 46. We are covering our fair share of that and we expect other airlines to follow. We have seen too much activity but it's rational to anticipate that those will be covered. And that is what partially explains our growth for the 43. What I want to stress, as I mentioned, that this growth of between 7% and 8%, 70% of that is driven by whiteboard flying, right? Again, those slides that we started after the 40th year of 25, that are year-on-year and there, plus some additional narrow-body flying, particularly in the domestic market as we catch up versus the previous actions before. So it's sustainable growth, it's discipline growth, and it doesn't consider any additional flying to the U.S. because the BMP order was listed just at the end of last week. So we are analyzing our options, and we soon will hear positive news on network expansion to the U.S., but it will not happen this year. It will be, if anything, it will be at the start of 2027.
Dwayne, a few more details on that. First of all, our 7%, 7%, 8% capacity growth, as Andres mentioned, super efficient growth, almost all driven by stage and gauge versus departure growth. So that's, I think, an important context. And then when you look at, just to give you some specifics on OA capacity growth for the fourth quarter, some modest growth domestically, low single digits, three points of growth, a little bit more on international, four points, but much below our growth in the quarter. So I look at the OA industry capacity growth in the fourth quarter to be favorable.
Operator
Thank you. And one moment for our next question. Our next question is going to come from the line of Michael Linenberg with Deutsche Bank. Your line is open. Please go ahead.
This is Shannon. It's already on for Mike. Thanks for taking my question. So we saw the headline come through about Valeris and Viva's expected merger approval by the end of this year. We're anticipating to see some remedies. Do you have any thoughts on what they could be and if Aeromexico would benefit from potential Shannon, I'm sorry.
We didn't hear that very well. Could you please repeat?
Oh, yeah. Just on, you know, Solaris and Viva's expected merger approval by the end of this year, and, you know, we're anticipating to see some remedies. Do you have any thoughts there, and would Aeromexico potentially benefit from remedies?
For the question, we were waiting for the decision of the authorities, as we mentioned before, our job is to continue strengthening our business. We continue to invest in our life to continue differentiating ourselves, our model from the UNPPs. So that's our job and I think, again, as I mentioned during our remarks, we have a very positive trend. We are very happy where the business is going. And so, we have been always in contact with the authorities, you know, sharing our views. And, you know, we cannot comment if it's going to be approved or not, but, you know, certainly, you know, in the past in many, many occasions in other parts of the world when these types of mercury are approved, they are usually, you know, common remedies. Which remedies is approved, we do not know yet. And, you know, we will show and explain our position, but again, I think we are in a good spot where we are today and going forward.
Thanks. And if I may follow up, you know, with the increase in slots from 44 to 46 per hour, do you think that this number increases further? I know the, you know, pre-pandemic airport is running in the low 60s. So I'm just wondering if there were any conversations about raising the slot limits further given the DOT's revocation, which would support further service to the U.S.? Thanks for taking the questions.
Yes. Again, this increased, what, to 44 to 46? Yesterday, our Secretary of Transportation, we are in the ANTA Forum, visited in Mexico He participated and, you know, he was asked that question and he did mention that, you know, going forward, you know, by the end of this decade, we can expect to see a larger number of operations in Mexico going to high 40s. That was, and this is, you know, in line with what we are projecting.
Operator
Thank you. And our next question is going to come from Guillermi Mendes with J.P. Morgan. Your line is open. Please go ahead.
Good morning all. Hi, Andres, Ricardo, Aaron, and Lucero. Thanks for taking my question. I have a follow-up on the fuel recapture and demand trends. I guess the initial remarks on the strong demand environment was very clear, But just wanted to better understand the breakdown between leisure, corporate, domestic, international, which segments are you seeing underperformance and which segments are you seeing underperformance? Thank you.
Yeah, I can take that. But in terms of performance and where we're seeing strength and as we look out into the fourth quarter, we're super optimistic on the wide-body fleet, Europe and Asia, in particular, because that's where all our growth is coming. So with the capacity expansion, we're going to daily in Incheon later in the winter IATA period, and then we're up 25% or so in Europe. in the fourth quarter. And given that capacity growth, we're really happy with the increases in fares and traction we're seeing. Demand, we're booked ahead in terms of load factor, and really across the board in all geographies. We sit here for the quarter up about two to three points and book load factor with that kind of capacity increase. So I'd say strength generally across the board, more international than we are domestic. And I think that follows in addition to just performance overall where we're seeing fuel recapture. Maybe highlighting another entity would be the U.S. You may recall fourth quarter U.S. was quite strong in the comp. And even on top of that, we're seeing strong fuel recapture that's been sticky and demand that really hasn't slowed down. Again, why I echo Andres' excitement about the DOT rescinding the order and us being able to grow into the U.S. in the future. So those would be the geographies where we're seeing strength. No real weaknesses. I mean, domestic market's a little different, and the competitive set's a little different. So your process for getting fuel recapture isn't the same. But generally speaking, across the board, we're pretty optimistic within all geographies.
Let me, I'll just complement what Aaron mentioned, if you look at the, you know, at the numbers, you know, revenue growth offset the fuel pressure. So we were able to recapture more than 100% of the fuel pressure. Again, not enough to consider the growth in other, you know, costs associated to inflation in Mexico, like labor costs, but it was a very strong performance. For the 4Q in the guidance that we gave, fuel recapture stands today at low 90, 92, 93. With initiatives that we described that we are not included, that may result in better rating numbers, we'd be confident that we can get close to 100% offset of the fuel. And I don't think many airlines in the industry can have this type of results.
Very clear. Thank you, guys. Guys, if I may follow up on breaking down between corporate and leisure, corporate continues to be relatively stronger.
Yeah, we're seeing strength across both those segments. We just did a corporate survey, a little pulse survey, and the vast majority of corporates are looking at fourth quarter demand at stable or slightly up. You know, corporate, where we did see some corporate impact was during the World Cup. There was definitely, and this was not surprising, But as, you know, hotel and fare prices were high during the Cup, in addition to just people's excitement around the Cup, we did see corporate not grow at the same pace as the leisure business. But that's really, as we've transitioned and distanced ourselves from the Cup, both corporate and your high-end leisure are behaving at a similar clip year over year. So both real strong demands.
Operator
Thank you. And our next question is going to come from the line of Jen Spies with Morgan Stanley. Your line is open. Please go ahead.
So, yeah, my first question is on the fourth quarter guide, specifically how it changed versus your previous four quarter guide, right? If we look at it, obviously, the biggest variable that changed is obviously the fuel price assumption. but at the end of the day your revenue guidance slightly declined despite the higher fuel. I mean some of it might be due to FX right but I was wondering are you not haven't you raised fares versus what you're expecting within your previous guidance to offset that higher fuel assumption and also trying to understand how this will impact like the next year, right? I mean, Andres, you already mentioned some metrics on fuel recapture, but assuming that fuel remains at this elevated level, I don't know, 4.3, 4.5, whatever, but should we expect more pronounced fair increases in revenue growth in the first quarter of next year?
Yeah, thank you, James, for your question. When we did the guidance in July and we expressed that, you know, we were expecting the site, you know, there was a piece of announcement, jet fuel went down. We were expecting first to speak, you know, at least for the end of the year. And that was reflected in the guidance. You know, obviously, you know, when the ceasefire didn't stick, you know, jet prices, jet fuel prices went up, but this, you know, the business type, we are paying, as you know, historically high jet fuel prices. We've never paid each jet fuel in history, not, you know, all the airlines, right? Even though crude oil is at, you know, 110, and, you know, it touched 180 back, you know, but just you know, only for a couple of days when the conflict in Ukraine started, we didn't . But what we are keen to sustain is the first time in history. We are, you know, we are adjusting. We have many initiatives in place. Every day, you know, we take and do this again nearly the last three weeks. It's not reflected these initiatives on their items. Hopefully, they will see very strong demand. Today, we are not in a position to review these diamonds because, again, they are very We need to wait a little bit more time. But we are working on it. Again, let me stress once again that the strong dollar versus the peso reflected in 2% lower growth in revenue for the . So if you adjust for that, if you go back to the July exchange rate, growth for the 4Q would be between 16% and 18% versus the 4Q of 2025. So adjusting for the PESO, and again, this initiative that we're taking, we could be close to the 20% year-on-year growth for 4Q, which would be outstanding and would put us again, in a whole position in the industry. And that's where we want to be, and we're working in that direction.
Yeah, I would just add to Andres' comments, and as I mentioned before, I wouldn't dismiss the headwind that FX has on revenue, but implicit, I think, in our guidance and the expectations is not that we're going to have significant movements on the fair recapture side. So it's conservative from that regard. With that being said, we are seeing no signs of demand cracking, right? We're going to go back like we do every week and look for opportunities to pass the cost of fuel on to consumers. And we're pretty optimistic that at this point through the year we've had to not have any signs of weakness in demand, I think that bodes well for us to continue to push on fuel recapture.
The additional fuel impact versus the July guidance, Jen, it's $170 million. It's around 11% of margin points. So if you adjust for that, in the guidance that we gave, edit margins are close to 20%. Again, we already tried two prices, which are the ones that we were expecting in July, not the same level that we were seeing in 2025. So that's where you can sense how strong structurally the company is.
Right, perfect. And one additional question. On the DOT ruling and the lifting of the restriction in Mexico City, you already mentioned that you plan to deploy additional capacity to the U.S. mainly next year.
But given the current FAA review and the potential downgrade to Category 2, isn't there like a window of opportunity to to anticipate those capacity deployments just to raise your capacity ahead of any potential downgrade on the essay review as you know about the big the Mexican government provided statement last week where you know they they press up the obviously there are I see many audit some observations you know much you know lower number of observations versus the last FAA audit that was done a few years ago and you know we are very close to the authorities we heard that I know they will be able to remedy those observations again in the alpha form that was held yesterday our Secretary of Transportation she stressed because you know one of the concerns that you know the FAA have was the budget for the Civil Aviation Authority in Mexico. So he mentioned that the budget considered for 2026 an increase of close to 60% in the resources to the attack, which is the Civil Aviation Authority. The FAA was there and you know they got together, they mentioned they have productive meetings. Yes, there was in the as well. So with this 60 percent, that will strengthen the capacity of the civil aviation authority to regulate the industry. They plan to hire, she mentioned, around 500 more people with 100 in 2026. So things are looking fine on that front. Again, it doesn't depend on us. It's an issue between the two governments. But we have that in mind. Things look well. And in our decisions to expand the network to the U.S., Yeah, I'll just add, too, there was the window that you discussed in the back and forth.
There was, I guess, a follow-up happening in February. So we're definitely, as we think about deploying capacity and expanding to new markets in the U.S., we have that window in mind.
Operator
Thank you. And our next question is going to come from the line of Ernst Anton Morton-Cotter-Tirazas with GBM. Your line is open. Please go ahead.
Hi, guys. Thank you for taking my question. Just a quick one. I was wondering if anything related with the recent events in Europe and specifically in France have caused any maybe change in the demand for some regions or affecting some of your long-haul travel.
I'm sorry, I didn't hear you very well. Could you please repeat? Maybe get a little away from the phone.
Hi, yes. I was asking if anything related to the events that recently happened in France and Europe has maybe impacted negatively any of the demand that you're seeing in your long haul. Thank you.
Yeah, we haven't seen any impact due to that. Obviously, watching closely as those events unfold, but so far, no impact.
We started, as you know, the new flight between Monterrey and Paris, and it's been, the performance has been very solid since the start. So we, you know, we were keeping it going forward, and we are launching, as I mentioned before, Guadalajara Paris. So, like Madrid, where we expanded, you know, from Guadalajara and Monterrey, current is, you know, for next point in Europe where we will deploy that strategy. And it's looking fine if clients have not affected, you know, growth factors.
Hi, this is Ricardo. We have a couple of questions from the webcast that we would like to respond. The first question is related to the implications of our guidance for the full quarter in terms of our cash flow performance. As we described in our remarks, we are convinced that one of the major successes that we have had financially this year has been able to maintain a strong cash flow generation, no? In the first nine months of the year, we have been able to generate a strong cash flow, no, net cash flow of around 540 million, which is only around 25 million below the net cash operating activity that we generated in the first nine months of last year. So this has been really a remarkable achievement and we expect that this trend will continue for the first workers. So overall for the first year what we expect is that the casual generation will be strong. We will be able to continue implementing our CAPEX plan. It is very important to highlight that we are not the main. Our CAPEX plan will continue to implement it. We will continue to bring down financial debt and then what we expect is that our cash finances will remain stable. So this will give us a lot of flexibility going forward, no, to any other initiative once conditions improve, you know. And so the second question that we have in the work class is related to our cash excuse Also, as we described in our remarks, the cask excuse trends have been positive and we expect them to continue to be positive. In the first half of the year, cask excuse grew around 15 percent, part of it reflecting a negative impact from the strong peso. In the third quarter, we reported an increase in cask excuse from 7 percent. But if you look at the guidance that we provided in the first quarter, it's expected actually to contract, you know, versus last year. So this is actually reflecting a more stable foreign exchange, but it's reflecting the operating levels that we have also highlighted in previous calls. The fact that we already have the capacity of the aircraft, you know, and that now we we'll be using these assets more intensively, more efficiently, producing revenue, and as we are able to do that, we should have an improvement in our margins, no? Producing revenue with assets on the one side, and on the other side, producing AFK, with the capacity as we currently have, and reducing our cash on the next year. So we expect this time to continue to improve in the following months. We're excited for being able to join the call. We continue to work to strengthen revenue, to contain costs, to continue providing these outstanding levels of profitability we need to be posted on any more relevant issue that we face. And we look forward for a very solid 4Q and end of this challenging year. Thank you very much again. And any follow-up questions, please let us know.
Operator
This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.
