Company: CTTRF
Filing Date: 2025-04-30
Form Type: 20-F
Source: 0001292814-25-001765
Chunk: 136

Company: Controladora Vuela Compania de Aviacion, S.A.B. de C.V.
Filing Date: 2025-04-30
Form: 20-F
Item: Item 4A
Chunk 136
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.$0.2 billion, U. S. $0.2 billion, and U. S. $0.4 billion, respectively, primarily denominated in Mexican
Pesos.

Hedging
relationships with non-derivative financial instruments.

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  Table of Contents  

We mitigate certain financial risks, such as volatility in the price of jet
fuel, adverse changes in interest rates and exchange rate fluctuations, through risk management that includes the use of derivative financial
instruments and non-derivative financial instruments.

In accordance with IFRS 9, derivative financial instruments and non-derivative
financial instruments are recognized in the consolidated statement of financial position at fair value. At the inception of a hedge relationship,
we formally designate and document the hedge relationship to which we wish to apply hedge accounting, as well as the risk management objective
and strategy for undertaking the hedge. The documentation includes the hedging strategy and objective, identification of the hedging instrument,
the hedged item or transaction, the nature of the risks being hedged and how we will assess the effectiveness of changes in the hedging
instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to
the hedged risks.

Only if such hedges (i) are expected to be effective in achieving offsetting
changes in fair value or cash flows of the hedge items and (ii) are assessed on an ongoing basis to determine that they have been effective
throughout the financial reporting periods for which they were designated, can hedge accounting treatment be used.

Under the cash flow hedge (“ CFH”), accounting model, the effective
portion of the hedging instrument’s changes in fair value is recognized in OCI, while the ineffective portion is recognized in current
year earnings in the statement of profit or loss. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss
on the hedging instrument and the cumulative change in fair value of the hedged item. The amounts recognized in OCI are transferred to
earnings in the period in which the hedged transaction affects earnings.

The realized gain or loss of derivative financial instruments and non-derivative
financial instruments that qualify as CFH are recorded in the same caption as the hedged item in the consolidated statement of operations.

See Item 3: “ Key Information - Risk Factors - Currency fluctuations
or the devaluation and depreciation of the U. S. dollar could adversely affect our business, results of operations, financial condition and