Company: CTTRF
Filing Date: 2025-04-30
Form Type: 20-F
Source: 0001292814-25-001765
Chunk: 338

Company: Controladora Vuela Compania de Aviacion, S.A.B. de C.V.
Filing Date: 2025-04-30
Form: 20-F
Item: Item 19
Chunk 338
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 17,428  
                                                                                               - 5                                    17,428  
                                                                                     2023      + 5            US$                    ( 8,788  
                                                                                               - 5                                     8,788  

  Interest rate risk  

Interest rate risk is the risk that the fair value of future
cash flows will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest
rates relates primarily to the Company’s long-term debt obligations and flight equipment lease agreements with floating interest
rates.

The Company’s results are affected by fluctuations
in certain benchmark market interest rates due to the impact that such changes may have on interest-bearing contractual agreements indexed
to the Secured Overnight Financing Rate (“ SOFR”) and the Interbank Equilibrium Interest Rate (“ TIIE”).

In November 2020, the ICE Benchmark Administration (“ IBA”),
the FCA-regulated and authorized administrator of LIBOR, announced that starting 2022, LIBOR will no longer be used to issue new loans
and the last rates were published on June 30, 2023. As of December 31, 2024 and 2023, all our U. S. dollar financing facilities at floating
rate are referenced to SOFR (Note 5b).

The Company uses derivative financial instruments to reduce
its exposure to fluctuations in market interest rates and accounts for these instruments as an accounting hedge.

In most cases, when a derivative can be tailored within the
terms and it perfectly matches cash flows of a leasing or financing agreement, it may be designated as a CFH and the effective portion
of fair value variations are recorded in equity until the date the cash flow of the hedged lease payment is recognized in the consolidated
statements of operations.

In July 2019, the Irrevocable Trust number CIB/3249, whose
trustor is the Company, entered into a cap to mitigate the risk due to interest rate increases on the CEBUR (VOLARCB19) coupon payments.
The floating rate coupons’ reference to TIIE 28 was limited under the “cap” to10% on the reference rate for the life
of the CEBUR (VOLARCB19) and had the same amortization schedule.

The cap started on July 19, 2019, and the maturity date was
June 20, 2024, consisting of59“caplets” with the same specifications as the CEBUR (VOL