Company: CTTRF
Filing Date: 2025-04-30
Form Type: 20-F
Source: 0001292814-25-001765
Chunk: 334

Company: Controladora Vuela Compania de Aviacion, S.A.B. de C.V.
Filing Date: 2025-04-30
Form: 20-F
Item: Item 19
Chunk 334
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 4Q 2024 and 1Q 2025.

In October 2024, the Company contracted Asian Call Options
on U. S. Gulf Coast Jet Fuel 54 designated to hedge14,457thousand gallons. These hedges represented a portion of the projected consumption
for the 4Q 2024 and 1Q 2025. During the years ended December 31, 2023 and 2022, the Company did not enter into derivative financial instruments
to hedge jet fuel.

In accordance with IFRS 9, the Company separates the intrinsic
value from the extrinsic value of an option contract; as such, the change in the intrinsic value can be designated as hedge accounting.
Because extrinsic value (time and volatility values) of the options is related to a “transaction-related hedged item,” it
is required to be segregated and accounted for as a cost of hedging in OCI and accrued as a separate component of stockholders’
equity until the related hedged item matures and therefore impacts profit and loss.

The underlying asset (U. S. Gulf Coast Jet Fuel 54) of the
options held by the Company during 2024 is a consumption asset (energy commodity), which is not in the Company’s inventory. Instead,
it is directly consumed by the Company’s fleet at different airport terminals. Therefore, although a non-financial asset is involved,
its initial recognition does not generate a book adjustment in the Company’s inventories.

Rather, it is initially accounted for in the Company’s
OCI and a reclassification adjustment is made from OCI to profit and loss and recognized in the same period or periods in which the hedged
item is expected to be allocated to profit and loss. Furthermore, when performing hedges, the Company hedges its forecasted jet fuel consumption
month after month, which is consistent with the maturity date of the monthly serial Asian call options.

During the year ended December 31, 2024, the intrinsic value
of the Asian call options recycled to the fuel cost was an expense of US$1,317.

As of December 31, 2024, the fair value of the outstanding
U. S. Gulf Coast Jet Fuel Asian call options was US$431. The cost of hedging derived from the extrinsic value changes of the jet fuel hedged
position given the out-of-the-money position as of December 31, 2024 recognized in other comprehensive loss was US$307.

The cost of hedging