Grupo Aeroméxico (AERO) Q3 2026 earnings review
Aeroméxico fares cover fuel, but its profit outlook falls
Aeroméxico raised fares enough to cover its record fuel bill, but a loyalty accounting change did much of the work. Revenue grew 14% to a record, while by our math a one-time $49 million loyalty item supplied about a quarter of operating profit. Chief executive Andrés Conesa said demand stayed healthy, yet the airline cut its profit plan again.
| Sales excluding the loyalty accounting item | $1,570M +10% from a year ago, by our math; $1,619M and +14% as printed |
|---|---|
| Operating margin | 11.7% 17.7% a year ago; 9.0% without the loyalty item |
| Net income | $41M $97M a year ago |
| Full-year operating margin outlook | Cut to 8.5–9.5% 11–13% in July; 15–17% in February |
⚖️ Verdict: 🔴 Bearish
The story got worse because fuel stayed high and the company lowered its full-year operating margin plan to about 9%, from 11% to 13%. Without the accounting item the quarter already sat near that level. The good news: the carrier kept its fourth-quarter capacity plan, and international fares absorb the fuel bill.
The question now is whether Aeroméxico can keep raising fares as fast as fuel if prices stay near $4.50 a gallon. Either international pricing power holds and the fourth quarter lands inside the plan, or seats already sold pull the margin below it. Fourth-quarter fuel and margin will tell.
🐂 Bull Case
Higher Fares Covered the Whole Fuel Increase
Aeroméxico has spent the year raising fares to cover jet fuel that costs far more than a year ago. The airline said it took "targeted pricing actions to mitigate the impact of higher fuel costs". Chief executive Andrés Conesa named premium products and loyalty as the other sources.
This quarter revenue rose $194 million while the fuel bill rose $172 million, so fares covered the whole increase. Even without the loyalty item in the bear section, by our math the carrier recovered 85% of the extra fuel cost, after 75% last quarter.
- International revenue: up 17%; domestic: up 7%
- Average fare per mile flown: up 11%, passengers down 3%
The gains matter because almost all the growth came from price, not from more flying. But domestic routes lag because low-cost rivals have not raised fares as much, so the fourth quarter leans on international demand.
What to watch: the gap between international and domestic revenue growth in the fourth quarter, due in February. A narrower gap would show domestic fares can rise too; a wider one would leave international travellers carrying the fuel bill.
Premium Products and Cargo Keep Growing
Aeroméxico sells premium products, meaning seats and services above its basic economy fares, and wants more of its revenue from them. Premium products made up 42% of passenger revenue, one point more than a year ago, because the airline kept selling cabin upgrades and extras.
The share slipped from 43% last quarter, so the climb is uneven. Still, passengers kept buying upgrades even as fares rose to cover fuel, which suggests customers are not trading down. Cargo helped too: freight revenue rose 15.8% to $90 million on new commercial initiatives.
What to watch: premium mix in the fourth quarter against 41.9% a year earlier. A reading of 43% or more would show the slip was seasonal; a flat reading would mean higher fares have started to cap upgrade demand.
Aeroméxico Keeps Its Fourth-Quarter Growth Plan
Since the fuel shock began in March, Aeroméxico has held capacity almost flat, and in July it said it might trim the fourth quarter too. Fuel stayed high, yet seat capacity should still rise 7% to 8% in the fourth quarter, a firmer floor than July's 6.5%.
The growth comes from flying its 170 aircraft more hours. "Higher utilization of our existing fleet is expected to support planned capacity growth", the company said. Aircraft cost the same whether they fly nine or ten hours, so cost per seat mile excluding fuel should stay broadly stable.
What to watch: fourth-quarter cost per seat mile excluding fuel, against 10.4 cents a year ago. A flat figure would confirm the extra flying pays for itself; a rise would mean 2027 needs cheaper fuel.
🐻 Bear Case
Fuel at $4.50 Cuts the Profit Plan Again
Jet fuel is the airline's largest cost, and the Middle East conflict has kept it near record levels since March. Aeroméxico paid $3.99 a gallon this quarter, 61% more than a year ago. September prices reached "the highest level since the Middle East conflict began in March".
The July plan assumed $3.20 a gallon for this quarter and $3.00 for the fourth. Fuel cost about $93 million more than assumed, which by our math took almost six points off the operating margin. The carrier now assumes $4.50 for the fourth quarter.
- Fuel as a share of revenue: 29%, up 8 percentage points
- Full-year operating margin plan: 8.5% to 9.5%, from 11% to 13%
- Fourth-quarter operating margin plan: 7.5% to 9.5%, from 15.5% to 18.5%
This is the second cut to the full-year profit plan in two quarters, and each tracks the fuel curve rather than demand. The case now rests on fares rising faster than fuel while December seats are partly sold.
What to watch: the fourth-quarter average fuel price against the $4.50 assumed. A lower figure would make the plan easy to meet; a higher one would push the margin below 7.5%.
A Loyalty Accounting Change Made the Quarter Look Better
Aeroméxico Rewards, the airline's loyalty programme, records revenue when members redeem points or when the company judges they never will. That second part, called breakage, is an estimate. This quarter the carrier changed it, "the first such alignment since 2018", to match how members actually use their points.
The change added $48.7 million of revenue with no cost attached. Conesa described the result as "record revenue and a double-digit operating margin of 12%". By our math, without the loyalty item revenue grew 10% rather than 14%, and the operating margin was 9.0%, not 11.7%.
- Loyalty item: $48.7 million, about a quarter of operating income
- Other revenue, where loyalty sits: $115 million, from $48 million
The company said the new baseline will "drive sustained, positive growth in our annual loyalty revenue moving forward". That may hold, but a one-time catch-up is not recurring revenue, and the release does not separate the two.
What to watch: other revenue in the fourth quarter against $52 million a year earlier. A figure near $60 million would show a recurring lift; one near $50 million would mean a single accounting step.
Costs Other Than Fuel Rise Faster Than Capacity
Airlines track cost per available seat mile excluding fuel, or CASM-ex, the cost of flying one seat one mile before fuel. Aeroméxico's reached 10.1 cents, up 7.1% from a year ago, because costs other than fuel rose 9.8% while capacity grew 1.3%.
The company blamed "the continued strength of the Mexican peso", which averaged 17.22 to the dollar against 18.67 a year ago. Wages rose 8.6%, but as a share of revenue they fell 0.9 points, because fares rose faster. The pace is slowing from 19% in the first quarter.
What to watch: whether fourth-quarter CASM-ex stays flat, as planned, while capacity grows 7% to 8%. A flat figure would mean the extra flying absorbs the peso and wage increases; a rise above 2% would mean it does not.
Risks this quarter didn't answer
Four standing concerns got no new information in the results release. Each stays where it was until the company addresses it on the call or in the quarterly filing.
- Viva and Volaris combination: the antitrust decision on Aeroméxico's two domestic low-cost rivals would reset domestic fares; the release does not mention it.
- American Express co-brand contract: due in the fourth quarter per the July call; a signed deal, or its terms, would move loyalty revenue either way.
- Flight attendant agreement: ratification was due by the end of July; the release says nothing about labour.
- Leverage target of about 1.6 times: leverage is now 2.1 times and the target has not been repeated since February.
👓 Other Themes
Aeroméxico Enlarged Its Credit Line and Took a 787
During the quarter the airline renewed its revolving credit facility and raised it from $200 million to $250 million, lifting total liquidity to $1.2 billion. It also received one Boeing 787-9, which takes the fleet to 170 aircraft with an average age of 9.1 years. Aeroméxico repaid $7.2 million of financial debt.
💲 Other KPIs
Debt rose relative to earnings for a third quarter in a row. Net leverage is net debt including leases divided by twelve months of adjusted EBITDAR. It reached 2.1 times from 1.7 in March and 1.8 at year-end, because EBITDAR fell while debt held near $4.1 billion. Net finance cost of $142 million absorbed three quarters of operating income.
Money owed to the airline grew faster than sales. Receivables rose 22% from December and 20% from a year ago, while revenue grew 14%. The cash flow statement shows $129 million absorbed by receivables in nine months, against $1 million a year earlier. Card and loyalty-partner sales explain part of it, but the carrier gave no breakdown.
Cash generation slowed. By our math, operating cash flow of $542 million less $258 million of capital spending left $284 million for the nine months. A year ago the figure was $355 million, and the third quarter alone produced $56 million. Cash ended at $965 million, $72 million below June, after $304 million of lease payments year to date.
🔮 Guidance
Trimmed by half a point. The plan calls for about $1.64–1.67 billion of revenue, by our math, or 15% growth at the middle of the range. Capacity growth of 7% to 8% does most of the work, so revenue per seat mile grows about 7%, half this quarter's pace.
Unchanged at the top, half a point firmer at the bottom. Aeroméxico will fly its existing fleet more hours rather than add aircraft. The fourth quarter of 2025 saw capacity fall 1.8%, so the comparison is easy; the full-year figure of 2% to 3% is unchanged.
Cut by nine points. Adjusted EBITDAR is profit before interest, tax, depreciation and aircraft rent, and the plan now has its margin below this quarter's 24.0%. The reason is fuel: the company assumes $4.50 a gallon against $3.00 in July, and a peso at 18.0 to the dollar.
Cut by eight points. The middle of the range, 8.5%, sits below this quarter's 11.7% and the 21% of a year ago, which held a $71 million one-time gain. By our math the range means $123–158 million of operating income. Net finance cost ran $142 million this quarter, so net income may be near zero.
Raised by half a point to about $6.08–6.14 billion, by our math. The raise reflects this quarter's loyalty accounting item and higher fares, not a change to the fourth quarter, whose plan edged down. Third raise in a row since February's 7.5% to 9.5%, each driven by fuel pass-through and the stronger peso.
Unchanged. Capacity is up 0.7% after nine months, so the full year depends on the fourth quarter. By our math, the middle of the range needs a fourth-quarter gain of about 8%. February's plan had called for 3% to 5% for the year.
Cut by three points. After nine months the margin stands at 22.3%. By our math the plan then implies about 21% in the fourth quarter, in line with the quarterly range. The second cut this year: February's plan said 28.5% to 30.5%.
Cut by three points at the middle of the range. Two cuts in two quarters, each smaller than the last: minus 4 points in July, minus 3 points now. Nine-month operating margin is 9.0%, so by our math the full year lands where the business already is if the fourth quarter delivers.
❓ Key Questions
What is the deferred revenue balance after the breakage change?
The release gives no balance for air traffic liability or loyalty liabilities. The breakage update cut the loyalty liability by an undisclosed amount. The forward stock is the best check on whether advance bookings support the fourth-quarter revenue plan.
How much fuel did fares recover, by the company's own count?
The company reported a 75% recapture rate last quarter but gave none this time. Its own figure would show whether the 85% we compute excluding the loyalty item matches management's view, and what the fourth-quarter plan assumes.
What does the U.S. DOT revocation of restrictions mean for routes?
A company notice dated October 19 announces that the U.S. Department of Transportation revoked restrictions affecting Mexico–U.S. service. The results release does not say which restrictions, or whether new Mexico City–U.S. routes can start in 2027.
Is the 1.6 times leverage target for 2026 still in force?
Leverage reached 2.1 times, up from 1.7 in March, and the February target has not been repeated. Investors need to know whether the company now plans to add debt for 2027 growth or expects EBITDAR to recover enough to deleverage.
What will the 2027 capacity and fleet plan look like?
In July the company said it would publish a 2027 growth plan later this year. With fuel assumed at $4.50 and 170 aircraft, the plan decides whether growth comes from utilization alone or from new deliveries that add lease cost.