Aeroméxico (AERO) Q4 2025 earnings review
Record Profits Fueled by TechOps Sale, but Core Operations Turn the Corner
Aeroméxico posted a 'record' Q4 with a 34.9% Adjusted EBITDAR margin, though this was heavily padded by a $71M one-time gain from the TechOps sale. Even stripping that out, the normalized performance was robust: normalized EBITDAR grew 8% YoY to $435M. The revenue decline of early 2025 has reversed, swinging to +3.4% normalized growth in Q4. Management is guiding for a pivotal shift in FY26: moving from capacity contraction (-1.8% in Q4) to expansion (+3-5% FY26) with healthy revenue growth of 7.5-9.5%.
🐂 Bull Case
After a year of shrinking capacity (-1.8% in Q4), Aeroméxico is pivoting to offense. FY26 guidance projects 3-5% capacity growth and nearly double-digit revenue growth (7.5-9.5%), signaling confidence in demand durability.
Despite capacity constraints, TRASM (Total Revenue per ASM) rose 2.0% (5.3% normalized). Premium revenue now accounts for 41.9% of passenger revenue, up from 40.4% last year, proving the airline can monetize high-value travelers.
🐻 Bear Case
The cost of flying is rising faster than capacity. CASM-ex fuel jumped 5.9% in Q4 to 10.4¢, driven by an 11.9% spike in labor costs following collective bargaining agreement renegotiations. This sets a higher expense baseline for FY26.
21% of Q4's Operating Income came from the one-time TechOps sale ($71M). Without this and prior-year Boeing compensation, the 'record' narrative is less dramatic, and 1Q26 guidance implies margins will drop back to 11-13% due to seasonality.
⚖️ Verdict: 🟢
Bullish. While the 'record' headline numbers are inflated by one-offs, the underlying business has successfully pivoted from contraction to growth. Normalized margins are expanding, and the FY26 guidance suggests the demand recovery is sustainable.
Key Themes
Labor Costs Reset Higher
Operating expenses were stubborn despite capacity cuts. The primary driver was Labor: Wages, salaries, and benefits surged 11.9% YoY to $319M. This follows the renegotiation of all Collective Bargaining Agreements (CBAs) in 2024. While necessary for labor peace, it permanently elevates the CASM-ex floor.
One-Off Gains vs. Operational Reality
It is critical to separate the noise from the signal. Q4 benefited from a $71.1M gain on the TechOps sale. Conversely, Q4 2024 had benefits from Boeing compensation. When normalized, Adjusted EBITDAR still grew a healthy 8.3%, but the margin is 30.2% rather than the reported 34.9%.
Ancillary Revenue Headwind
Ancillary revenue collapsed 33% YoY in Q4 to $112M. This appears alarming but is largely due to a difficult comparison: Q4 2024 included a one-time recognition of expired tickets ($44M benefit). Stripping this out, the trend is stable, but it remains a drag on top-line growth percentages.
Demand Recovery Materializing
After a soft H1 2025 caused by issues in border markets, management confirmed the 'recovery trend' fully materialized in Q4. Domestic passenger revenue grew 4.0% and International grew 4.4%. This momentum underpins the aggressive FY26 revenue guidance.
Peso Volatility Impact
Currency remains a double-edged sword. In Q4, the Peso appreciation increased peso-denominated expenses, contributing to the cost hike. However, net financing costs dropped significantly ($123M vs $179M LY) primarily due to FX gains on debt. Volatility here creates noise in the P&L.
Other KPIs
Stable. Up slightly from 1.6x a year ago but remains healthy. Management is guiding for further deleveraging to ~1.6x by the end of FY26, signaling strong expected cash generation.
Strong. Cash position increased to $1.02B (up from $842M YoY). Liquidity ratio stands at 22.8% of LTM revenue. This supported $156M in debt amortization and $203M in capital reimbursements to shareholders in 2025.
Growing slowly. Received 3 MAX aircraft in Q4. The fleet mix is becoming more efficient, contributing to a 0.9% reduction in fuel burn per ASM. The MAX fleet now totals 75 aircraft (45 MAX-8, 30 MAX-9).
Guidance
Accelerating. The midpoint implies ~11% YoY growth, a massive acceleration from the flat/negative growth seen throughout 2025. This confirms the demand recovery narrative.
Reversing. Moving from contraction (-1.8% in 4Q25) to expansion. This suggests fleet constraints are easing and management is chasing volume again.
Stable. The midpoint (29.5%) is slightly below the FY25 reported level of 31.2% (which was inflated by one-offs) but consistent with the normalized FY25 margin of 30.0%. It implies strong operational control despite cost inflation.
Decelerating. A significant step down from Q4's 21.1% (or 16.4% normalized), reflecting typical Q1 seasonality where demand softens compared to the Q4 holiday peak.
Key Questions
Delta JV Termination Impact
The DOT final order to terminate the Delta JV immunity is effective Jan 1, 2026. While you are appealing, does the FY26 guidance ($5.8B Revenue) assume the JV continues as is, or have you priced in a potential disruption to transborder cooperation?
Yield Durability vs Capacity Growth
You achieved strong TRASM growth (+5.3% normalized) while capacity was shrinking. As you pivot to +3-5% capacity growth in FY26, can you maintain positive pricing, or will volume growth come at the expense of yields?
TechOps Proceeds Usage
With the $71M inflow from the TechOps sale and a strong cash position ($1B+), will capital allocation in 2026 lean more toward fleet expansion (CapEx) or increased shareholder returns (buybacks/dividends)?