Company: CTTRF
Filing Date: 2025-04-30
Form Type: 20-F
Source: 0001292814-25-001765
Chunk: 27

Company: Controladora Vuela Compania de Aviacion, S.A.B. de C.V.
Filing Date: 2025-04-30
Form: 20-F
Item: Item 3
Chunk 27
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 our fuel costs.

Our fuel hedging policy allows us to enter into fuel derivative
instruments to hedge against changes in fuel prices when we have excess cash available to support the costs of such hedges. As of December
31, 2024, we did have hedge positions for our projected fuel requirements for the first quarter of 2025 in the form of Asian Calls Options.

To the extent we decide to start a hedging program to hedge
a portion of our future fuel requirements, such hedging program may not be successful in mitigating higher fuel costs and any price protection
provided may be limited due to the choice of hedging instruments and market conditions, including breakdown of correlation between hedging
instrument and market price of aircraft fuel and failure of hedge counterparties. To the extent that we decide to use hedge contracts
that have the potential to create an obligation to pay upon settlement if fuel prices decline significantly, such hedge contracts may
limit our ability to benefit fully from lower fuel prices in the future. If fuel prices decline significantly from the levels existing
at the time we enter into a hedge contract, we may be required to post collateral (margin) beyond certain thresholds. There can be no
assurance that our hedging arrangements, if any, would provide any particular level of protection against rises in fuel prices or that
our counterparties will be able to perform under our hedging arrangements.

Furthermore, our ability to react to the cost of fuel is limited
since we set the price of tickets in advance of incurring fuel costs. Our ability to pass on any significant increases in fuel costs through
fare increases is also limited by our ULCC model. Additionally, deterioration in our financial condition could negatively affect our ability
to enter into hedge contracts in the future. As a result, we cannot guarantee that we will be able to secure new fuel derivative contracts
or transactions on terms which are commercially acceptable to us or at all.

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  Table of Contents  

We have a significant amount of
fixed obligations that could impair our liquidity and thereby harm our business, results of operations and financial condition.

The airline business is capital intensive and, as a result,
many airlines are highly leveraged. Most of our aircraft and spare engines are leased, and we paid the lessors rent and maintenance deposits
aggregating U. S. $583.4 million and U. S. $16.8 million, respectively, in 2024, and have future operating lease obligations aggregating
U. S. $3