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Financial instruments and risk management | 12 Months Ended
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Dec. 31, 2023
Financial instruments and risk management |
Financial instruments and risk management | 3. Financial instruments and risk management Financial risk management The Company’s activities are exposed to different financial risks stemmed from exogenous variables which are not under their control but whose effects might be potentially adverse such as: (i) market risk, (ii) credit risk, and (iii) liquidity risk. The Company’s global risk management program is focused on uncertainty in the financial markets and tries to minimize the potential adverse effects on net earnings and working capital requirements. The Company uses derivative financial instruments to hedge part of such risks. The Company does not enter into derivatives for trading or speculative purposes. The sources of these financial risk exposures are included in both “on balance sheet” exposures, such as recognized financial assets and liabilities, as well as in “off-balance sheet” contractual agreements and on highly expected forecasted transactions. These on and off-balance sheet exposures, depending on their profiles, do represent potential cash flow variability exposure, in terms of receiving less inflows or facing the need to meet outflows which are higher than expected, therefore increase the working capital requirements. Since adverse movements erode the value of recognized financial assets and liabilities, as well some other off-balance sheet financial exposures, there is a need for value preservation, by transforming the profiles of these fair value exposures. The Company has a Finance and Risk Management department, which identifies and measures financial risk exposures, in order to design strategies to mitigate or transform the profile of certain risk exposures, which are taken up to the corporate governance level for approval. Market risk a) Jet fuel price risk Since the contractual agreements with jet fuel suppliers include reference to jet fuel index, the Company is exposed to fuel price risk which might have an impact on the forecasted consumption volumes. The Company’s jet fuel risk management policy aims to provide the Company with protection against increases in jet fuel prices. In an effort to achieve the aforesaid, the risk management policy allows the use of derivative financial instruments available on over the counter (“OTC”) markets with approved counterparties and within approved limits. Aircraft jet fuel consumed in the years ended December 31, 2023, 2022 and 2021 represented 38%, 46% and 34% (includes derivative and non-derivative financial instruments for 2021) of the Company’s operating expenses, respectively. During the years ended December 31, 2023, 2022 and 2021 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 (Jet Fuel) of the options held by the Company during 2021 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 an 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. All the Company’s calls matured throughout the first quarter of 2021. The Zero-Cost Collars matured throughout the second quarter of 2021, leaving no outstanding fuel position going forward as of December 31, 2023, 2022, and 2021. During the years ended December 31, 2023, 2022 and 2021 there was no cash flow to recycle for the Zero-Cost collar position. During the year ended December 31, 2021, the intrinsic value of the call options recycled to the fuel cost was an expense of US$619. These derivative financial instruments were effective. For the year ended December 31, 2021, there was no cost of hedging as all the derivatives position matured through 2Q2021. As of December 31, 2023, and 2022, the Company didn´t hold any outstanding fuel position. Fuel Sensitivity The sensitivity analysis provided below presents the impact of a change of US$0.01 per gallon in fuel market spot price in the Company´s financial performance. Considering these figures, an increase of US$0.01 per gallon in the fuel prices during 2023, 2022 and 2021 would have impacted the Company’s operating costs in US$3,719, US$3,399 and US$2,731, respectively. ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of December 31,
​ | ​ | 2023 | ​ | 2022 | ​ | 2021
​ |  | Operating costs |  | Operating costs |  | Operating costs
​ | ​ | (In thousands of U.S. dollars)
+ US$0.01 per gallon | ​ | 3,719 | ​ | 3,399 | ​ | 2,731
- US$0.01 per gallon | ​ | (3,719) | ​ | (3,399) | ​ | (2,731)
​ The Company has been proactively trying to mitigate this impact over our business through revenue yielding and a continued effort towards a reduced fuel consumption. Nonetheless, our ability to pass on any significant increases in fuel costs through fare increases is also limited by our ultra-low-cost business model and market high elasticity to price. b) Foreign currency risk The Company is exposed to transactional foreign currency risk due to potential mismatches between the currencies in which sales, expenses, receivables, and borrowings are denominated, and the respective functional currencies of the Company and its subsidiaries. The U.S. dollar is the functional currency for Controladora and its main subsidiaries. Transactions are primarily denominated in U.S. dollars and Mexican pesos, with minor transactions denominated in other currencies such as Quetzales, Colombian pesos, and Colones. Foreign currency risk arises from possible unfavorable movements in the exchange rate which could have a negative impact in the Company’s cash flows. To mitigate this risk, the Company may use foreign exchange derivative financial instruments and non-derivative financial instruments. The summary of quantitative data about the Company’s exposure to currency risk as of December 31, 2023 is as set forth below: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Mexican Pesos |  | Others (1)
​ | ​ | (In thousands of U.S. dollars)
Assets: | ​ | ​ | ​ | ​ | ​ | ​
Cash, cash equivalents and restricted cash |  | US$ | 100,488 | ​ | US$ | 13,287
Other accounts receivable, net |  |  | 54,594 | ​ |  | 34,650
Guarantee deposits |  |  | 29,951 | ​ |  | 514
Derivative financial instruments | ​ | ​ | 1,683 | ​ | ​ | —
Total assets |  | US$ | 186,716 | ​ | US$ | 48,451
​ | ​ | ​ | ​ | ​ | ​ | ​
Liabilities: |  |  |  | ​ |  |
Financial debt |  | US$ | 186,251 | ​ | US$ | —
Lease liabilities |  |  | 19,655 | ​ |  | 73
Suppliers |  |  | 142,453 | ​ |  | 2,254
Other liabilities | ​ | ​ | 57,283 | ​ | ​ | 2,958
Total liabilities |  | US$ | 405,642 | ​ | US$ | 5,285
Net foreign currency position |  | US$ | (218,926) | ​ | US$ | 43,166
(1) The foreign exchange exposure includes: Quetzales, Colombian pesos and Colones. The summary of quantitative data about the Company’s exposure to currency risk as of December 31, 2022 is as set forth below: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Mexican Pesos |  | Others (1)
​ | ​ | (In thousands of U.S. dollars)
Assets: |  | ​ | ​ | ​ | ​ | ​
Cash, cash equivalents and restricted cash |  | US$ | 39,962 | ​ | US$ | 6,129
Other accounts receivable, net |  | ​ | 66,254 | ​ | ​ | 12,595
Guarantee deposits |  | ​ | 23,981 | ​ | ​ | 252
Derivative financial instruments |  | ​ | 1,585 | ​ | ​ | —
Total assets |  | US$ | 131,782 | ​ | US$ | 18,976
​ | ​ | ​ | ​ | ​ | ​ | ​
Liabilities: |  | ​ | ​ | ​ | ​ | ​
Financial debt |  | US$ | 133,837 | ​ | US$ | —
Lease liabilities | ​ | ​ | 17,003 | ​ | ​ | 103
Suppliers |  | ​ | 124,374 | ​ | ​ | 1,496
Other liabilities |  | ​ | 81,378 | ​ | ​ | 1,277
Total liabilities |  | US$ | 356,592 | ​ | US$ | 2,876
Net foreign currency position |  | US$ | (224,810) | ​ | US$ | 16,100
(1) The foreign exchange exposure includes: Quetzales, Colombian pesos and Colones. At April 29, 2024, the exchange rate was 1 US per 17.1883 MXP. In determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which the Company initially recognizes the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, the Company determines the transaction date for each payment or receipt of advance consideration. As of December 31, 2023, 2022 and 2021, the Company did not enter into foreign exchange rate derivatives financial instruments. Foreign currency sensitivity The following table demonstrates the sensitivity of a reasonably possible change in Mexican peso exchange. The rate to U.S dollar that would have occurred as of December 31, 2023 and 2022, with all other variables held constant. The movement in the pre-tax effect shown below represents the result of a change in the fair value of assets and liabilities denominated in Mexican peso. The Company’s exposure to foreign currency exchange rates for all other currencies is not material. ​
​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Change in | ​ | Effect on profit
​ |  | MXN$ rate |  | before tax
​ | ​ | ​ | ​ | (In thousands of
​ | ​ | ​ | ​ | U.S. dollars)
2023 |  | +5 | % | US$ | (8,788)
​ |  | -5 | % | ​ | 8,788
​
​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Change in | ​ | Effect on profit
​ |  | MXN$ rate |  | before tax
​ |  |  |  | (In thousands of
​ | ​ | ​ | ​ | U.S. dollars)
2022 |  | +5 | % | US$ | (10,436)
​ |  | -5 | % | ​ | 10,436
​ i) Hedging relationships designating non-derivative financial instruments as hedging instruments for foreign exchange (FX) risk Regarding the foreign currency risk, effective January 1st, 2019, the Company implemented two hedging strategies associated to forecasted FX exposures, by using non-derivatives financial assets and liabilities denominated in US as hedging instruments. In the first FX hedging strategy, the Company designated a hedge to mitigate the variability in FX fluctuation denominated in US associated to forecasted revenues by using a portion of US denominated financial liabilities associated to a portfolio of leasing liabilities up until the terms of the remaining leasing arrangements. As of December 31, 2023, 2022 and 2021, there was not outstanding US balance designated under this hedging strategy due to the discontinuation of the hedge relationships at the end of 2021. Additionally, during the year ended December 31, 2021, the impact of these hedges was US$21,378, which has been presented as part of the total operating revenue. The second FX strategy consisted on designating a hedging relationship by using a portion of US denominated non-derivative financial assets as hedging instruments, to mitigate the FX variability (MXN/US) contractually included as a component in the purchase of a portion of future Jet Fuel consumption. For this strategy designated in 2019, a portion of the Jet Fuel consumption over the two following years was designated as hedged item; while the hedging instrument was represented by US denominated recognized assets, including guaranteed deposits and cash and cash equivalents equivalent to US$410 million, which represent a portion of the financial assets denominated in US$. During the first quarter of 2021, the designated hedging instrument back in 2019 for US$410 million expired consistent with the same foreign exchange strategy, the Company decided to designate a new hedging relationship, like the one concluded. For this new strategy a portion of the Jet Fuel consumption over the two following years was designated as hedged item; while the hedging instrument was represented by US$ denominated recognized assets, including guaranteed deposits and cash and cash equivalents equivalent to US$350 million, which represent a portion of the financial assets denominated in US$. As of December 31, 2021, as a result of the change in functional currency from the Mexican peso to the US dollar, the Company concluded that these hedging strategies will no longer be effective, for which reason it accounted for the discontinuation of the hedge relationships. Accordingly, the cash flow hedge reserve in other comprehensive income at the date of the change of US$109 million was reclassified to the income statement, which represented a loss within the foreign exchange (loss) gain, net caption. As of December 31, 2023, 2022 and 2021, there was not outstanding US$ balance designated under this hedging strategy due to the discontinuation of the hedge relationships. During the year ended December 31, 2021, the impact of these hedges was US$8,945, presented as part of the total fuel expense. Since the hedged items for both hedging strategies were targeted at mitigating the cash flow variability of highly expected forecasted transactions, these were represented by multiple hedging relationships which followed the Cash Flow Hedge Accounting Model. In accordance with IFRS 9, the effective portion related to changes in the fair value of the hedging instruments, was taken to the hedge reserve within the OCI, and was presented under a separate caption within the Company’s Stakeholders Equity. The amounts recorded in OCI were recycled to the consolidated statement of operations on a timely basis as the corresponding US denominated income and/or Jet Fuel consumption, affecting the Company’s operating margins, the recycled amounts are presented as adjustments to operating income and expenses related to each FX hedging strategy. c) 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”). In November 2020 the ICE Benchmark Administration (“IBA”), the FCA-regulated and authorized administrator of LIBOR, announced that starting 2022, LIBOR would no longer be used to issue new loans and the last rates were published on 30 June 2023. As of December 31, 2023 and 2022, all our US 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 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 are limited under the “cap” to 10% on the reference rate for the life of the CEBUR (VOLARCB19) and have the same amortization schedule. The cap started on July 19, 2019, and the maturity date is June 20, 2024; consisting of 59 “caplets” with the same specifications as the CEBUR (VOLARCB19) coupons for reference rate determination, coupon term, and fair value. The following table shows the sensitivity analysis of the change that would have occurred in the fair value of the interest hedging instrument on the CEBUR (VOLARCB19) in 2023 and 2022 as a result of a reasonably possible change in rates, keeping all other variables constant is as set forth below: ​
​ | ​ | ​ | ​ | ​ | ​
​ |  | Change in |  | ​ | ​
​ | ​ | interest rate | ​ | Effect on cap (1)
​ | ​ | ​ | ​ | (In thousands of U.S.
​ | ​ | ​ | ​ | dollars)
2023 |  | +0.50 | % | US$ | 14
​ |  | -0.50 | % | ​ | (13)
​ | ​ | ​ | ​ | ​ | ​
2022 |  | +0.50 | % | US$ | (121)
​ |  | -0.50 | % | ​ | 121
(1) The effect would affect OCI in relation to the interest rate caps. In addition, during November 2021 the Trust entered into a cap to mitigate the risk due to interest rate increases on the CEBUR (VOLARCB21L) coupon payments. The floating rate coupons reference to TIIE 28 are limited under the cap to 10% on the reference rate for the life of the CEBUR (VOLARCB21L) and have the same amortization schedule. The cap started on November 3, 2021, and the maturity date is October 20, 2026; consisting of 59 “caplets” with the same specifications as the CEBUR (VOLARCB21L) coupons for reference rate determination, coupon term, and fair value. The following table shows the sensitivity analysis of the change that would have occurred in the fair value of the interest hedging instrument on the CEBUR (VOLARCB21L) in 2023 and 2022 as a result of a reasonably possible change in rates, keeping all other variables constant is as set forth below: ​
​ | ​ | ​ | ​ | ​ | ​
​ |  | Change in |  | ​ | ​
​ | ​ | interest rate | ​ | Effect on cap (1)
​ | ​ | ​ | ​ | (In thousands of U.S.
​ | ​ | ​ | ​ | dollars)
2023 |  | +0.50 | % | US$ | 311
​ |  | -0.50 | % | ​ | (269)
​ | ​ | ​ | ​ | ​ | ​
2022 |  | +0.50 | % | US$ | (590)
​ |  | -0.50 | % | ​ | 590
(1) The effect would affect OCI in relation to the interest rate caps. In October 2023 the Trust entered into a cap to mitigate the risk due to interest rate increases on the CEBUR (VOLARCB23) coupon payments. The floating rate coupons reference to TIIE 28 are limited under the cap to 13% on the reference rate for the life of the CEBUR (VOLARCB23) and have the same amortization schedule. The cap started on October 20, 2023, and the maturity date is September 20, 2028; consisting of 59 “caplets” with the same specifications as the CEBUR (VOLARCB23) coupons for reference rate determination, coupon term, and fair value. The following table shows the sensitivity analysis of the change that would have occurred in the fair value of the interest hedging instrument on the CEBUR (VOLARCB23) in 2023 as a result of a reasonably possible change in rates, keeping all other variables constant is as set forth below: ​
​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Change in | ​ | ​ | ​
​ |  | interest rate |  | Effect on cap (1)
​ | ​ | ​ | ​ | (In thousands of
​ | ​ | ​ | ​ | U.S. dollars)
2023 | ​ | +0.50 | % | US$ | 132
​ | ​ | -0.50 | % | ​ | (89)
(1) The effect would affect OCI in relation to the interest rate caps. As of December 31, 2023 and 2022, the Company’s outstanding hedging contracts in the form of interest rate caps with notional amount of Ps.3.16 billion (US$187.4 million based on an exchange rate of Ps.16.89 to US$1 on December 31, 2023) and Ps.2.25 billion (US$116.2 million based on an exchange rate of Ps.19.36 to US$1 on December 31, 2022), respectively, had fair values of US$1,683 and US$1,585, respectively, and are presented as part of the financial assets in the consolidated statement of financial position. As of December 31, 2023 and 2022 the effect allocated in OCI in relation to the interest rate caps amounts to US$922 and US$109, respectively. For the years ended December 31, 2023, 2022 and 2021 the amortization of the intrinsic value of the cap was US$579, US$161 and US$69 respectively, recycled to the statement of operations as part of the finance cost. During 2023 and 2022 there was no ineffective portion resulting from these hedging instruments. Debt Sensitivity Analysis The following sensitivity analysis considers the position exposed to variable interest rates. The Interbank Equilibrium Interest Rate of the Banco de Mexico (TIIE) 28 days increased 72 basis points and 505 basis points in 2023 and 2022, respectively, going from 10.78% to 11.50%, and from 5.72% to 10.77%, respectively. The Secured Overnight Financing Rate (SOFR) three months increased 73 basis points and 450 basis points in 2023 and 2022, respectively, going from 4.60% to 5.33% and from 0.09% to 4.59%, respectively, and SOFR one month increased 99 basis points and 430 basis points in 2023 and 2022, respectively, going from 4.36% to 5.35%, and from 0.05% to 4.36%, respectively. In addition to the reference rate changes, if the interest rate had changed on an annual average in the magnitude shown, the impact on the interest expense in the consolidated statements of operations would have been as shown below: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Year ended December 31, 2023 |  | Year ended December 31, 2022
​ | ​ | + 100 BP |  | - 100 BP |  | + 100 BP |  | - 100 BP
​ | ​ | ​ | (In thousands of U.S. dollars)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Asset backed trust notes (“CEBUR”) (1) |  | US$ | 1,435 |  | US$ | (1,435) |  | US$ | 1,320 |  | US$ | (1,320)
Incline II B Shannon 18 Limited (PDP BBAM) | ​ | ​ | 930 | ​ | ​ | (930) | ​ | ​ | 224 | ​ | ​ | (224)
Banco Santander México, S.A. y Banco Nacional de Comercio Exterior, S.N.C. (“Santander-Bancomext 2022”) | ​ | ​ | 533 | ​ | ​ | (533) | ​ | ​ | 96 | ​ | ​ | (96)
GY Aviation Lease 1714 Co. Limited (PDP CDB) | ​ | ​ | 352 | ​ | ​ | (352) | ​ | ​ | 38 | ​ | ​ | (38)
JSA International U.S. Holdings, LLC (PDP JSA) | ​ | ​ | 288 | ​ | ​ | (288) | ​ | ​ | 88 | ​ | ​ | (88)
Oriental Leasing 6 Company Limited (PDP CMB) | ​ | ​ | 131 | ​ | ​ | (131) | ​ | ​ | 19 | ​ | ​ | (19)
Tarquin Limited | ​ | ​ | 111 | ​ | ​ | (111) | ​ | ​ | — | ​ | ​ | —
Wilmington Trust SP Services (Dublin) Limited | ​ | ​ | 24 | ​ | ​ | (24) | ​ | ​ | — | ​ | ​ | —
NBB- V11218 Lease Partnership | ​ | ​ | 22 | ​ | ​ | (22) | ​ | ​ | — | ​ | ​ | —
NBB- V11951 Lease Partnership | ​ | ​ | 21 | ​ | ​ | (21) | ​ | ​ | — | ​ | ​ | —
NBB Pintail Co. Ltd. | ​ | ​ | 17 | ​ | ​ | (17) | ​ | ​ | — | ​ | ​ | —
Banco Nacional de Comercio Exterior, S.N.C. (“Bancomext”) |  | ​ | — |  | ​ | — |  | ​ | 961 |  | ​ | (961)
Banco Sabadell S.A., Institución de Banca Múltiple (“Sabadell”) | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 49 | ​ | ​ | (49)
Banco Actinver S.A., Institución de banca múltiple ("Actinver") | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 6 | ​ | ​ | (6)
Total |  | US$ | 3,864 |  | US$ | (3,864) |  | US$ | 2,801 |  | US$ | (2,801)
(1) Every Trust Note of (CEBUR VOLARCB19 and VOLARCB21L) issuance has a 10% CAP and for every Trust Note of (CEBUR VOLARCB23) issuance has a 13% CAP, both on TIIE 28 to limit interest payments to increasing rates. ​ d) Liquidity risk Liquidity risk represents the risk that the Company has insufficient funds to meet its obligations.Because of the cyclical nature of the business, the operations, and its investment and financing needs related to the acquisition of new aircraft and renewal of its fleet, the Company requires liquid funds to meet its obligations. The Company manages its cash, cash equivalents and its financial assets, relating the term of investments with those of its obligations. Its policy is that the average term of its investments may not exceed the average term of its obligations. This cash and cash equivalents position is invested in highly liquid short-term instruments through financial entities. The Company has future obligations related to maturities of bank borrowings, lease liabilities and derivative contracts. The Company’s exposure outside consolidated statements of financial position represents the future obligations related to aircraft purchase contracts. The Company concluded that it has a low concentration of risk since it has access to alternate sources of funding. The company has debts related to the Aircraft pre-delivery payments, which are settled with the reimbursement of the Aircraft pre-delivery payments when the sale and leaseback transaction is carried out (Note 25). As of December 31, 2023, our cash, cash equivalents and restricted cash were US$774,154. The table below presents the Company’s contractual principal payments required on its financial liabilities and the derivative financial instruments fair value: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | December 31, 2023
​ | ​ | Within one | ​ | One to five | ​ | ​ | ​
​ |  | year |  | years |  | Total
Interest-bearing borrowings: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Aircraft pre-delivery payments (Note 5) |  | US$ | 157,318 |  | US$ | 151,322 |  | US$ | 308,640
Asset backed trust note (“CEBUR”) (Note 5) | ​ | ​ | 44,396 | ​ | ​ | 143,054 |  |  | 187,450
Other financing agreements (Note 5) | ​ | ​ | 12,157 | ​ | ​ | 140,906 | ​ | ​ | 153,063
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Lease liabilities: | ​ | ​ |  |  |  |  |  |  |
Aircraft, engines and buildings leases | ​ | ​ | 372,697 | ​ | ​ | 2,518,745 |  |  | 2,891,442
Aircraft and engine lease return obligation | ​ | ​ | 803 | ​ | ​ | 286,405 |  |  | 287,208
Total |  | US$ | 587,371 |  | US$ | 3,240,432 |  | US$ | 3,827,803
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | December 31, 2022
​ | ​ | Within one |  | One to five |  | ​
​ |  | year |  | years |  | Total
Interest-bearing borrowings: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Aircraft pre-delivery payments (Note 5) | ​ | US$ | 62,209 | ​ | US$ | 75,698 | ​ | US$ | 137,907
Asset backed trust note (“CEBUR”) (Note 5) | ​ | ​ | 30,128 | ​ | ​ | 86,082 | ​ | ​ | 116,210
Working Capital Facilities (Note 5) | ​ | ​ | 18,077 | ​ | ​ | — | ​ | ​ | 18,077
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Lease liabilities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Aircraft, engines and buildings leases | ​ | ​ | 335,620 | ​ | ​ | 2,373,103 | ​ | ​ | 2,708,723
Aircraft and engine lease return obligation | ​ | ​ | 5,012 | ​ | ​ | 244,454 | ​ | ​ | 249,466
Total | ​ | US$ | 451,046 | ​ | US$ | 2,779,337 | ​ | US$ | 3,230,383
​ e) Credit risk Credit risk is the risk that any counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily from trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments including financial instruments derivatives. Financial instruments that expose the Company to credit risk involve mainly cash equivalents and accounts receivable. Credit risk on cash equivalents relate to amounts invested with financial institutions. Credit risk on accounts receivable relates primarily to amounts receivable from the international credit card companies. The Company has a high receivable turnover, hence management believes credit risk is minimal due to the nature of its businesses, which have a large portion of their sales settled in credit cards. The credit risk on liquid funds and derivative financial instruments is limited because the counterparties have a high credit rating assigned by international credit-rating agencies. Some of the outstanding derivative financial instruments expose the Company to credit loss in the event of nonperformance by the counterparties to the agreements. However, the Company does not expect any of its counterparties to fail to meet their obligations. The amount of such credit exposure is generally the unrealized gain, if any, in such contracts. To manage credit risk, the Company selects counterparties based on credit assessments, limits overall exposure to any single counterparty and monitors the market position with each counterparty. The Company does not purchase or hold derivative financial instruments for trading purposes. As of December 31, 2023, the Company determined that its credit risk associated with outstanding derivative financial instruments is low, as it exclusively engages in such instruments with counterparties that have high credit ratings assigned by international credit-rating agencies. f) Capital management Management believes that the resources available to the Company are enough for its present requirements and will be sufficient to meet its anticipated requirements for capital expenditures and other cash requirements for the next fiscal year. The primary objective of the Company’s capital management is to ensure that it maintains healthy capital ratios to support its business and maximize the shareholder’s value. No changes were made in the objectives, policies or processes for managing capital during the years ended December 31, 2023 and 2022. The Company is not subject to any externally imposed capital requirement, other than the legal reserve (Note 19). As part of the management strategies related to acquisition of its aircraft (pre-delivery payments), the Company pays the associated short-term obligations by entering into sale-leaseback agreements, whereby an aircraft is sold to a lessor upon delivery (Note 5b).

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