Is AERO a good stock to buy? We came across a bullish thesis on Grupo Aeromexico, S.A.B. de C.V on Chop Wood, Carry Water Investment Journal ’s Substack by Alexandru Dragut. In this article, we will summarize the bulls’ thesis on AERO. Grupo Aeromexico, S.A.B. de C.V’s share was trading at $16.60 as of March 5th. AERO’s trailing P/E was 7.40 according to Yahoo Finance.
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Grupo Aeroméxico, S.A.B. de C.V., through its subsidiaries, provide public air carrier services for passengers and goods. AERO represents a rare investment case in the highly capital-intensive and historically value-destructive airline industry. As Mexico’s only full-service carrier, it dominates 93% of domestic corporate demand from its capacity-constrained Mexico City hub and leverages its proprietary Aeromexico Rewards program to capture premium travelers.
Emerging from a 2022 Chapter 11 restructuring, the airline now operates with a leaner cost structure, larger, more fuel-efficient aircraft, and record operating margins, achieving an Adjusted EBITDAR margin of 31.2% in 2025. Revenue remains heavily concentrated in scheduled passenger transport (91.7%), supplemented by cargo and ancillary services, with strong unit economics highlighted by a Total Revenue per ASM of 16.4¢ against a Cost per ASM of 13.6¢, and a multi-year revenue CAGR of 35.8% since restructuring.
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Aeromexico’s competitive advantage is anchored in its regulatory and infrastructure dominance at Mexico City International Airport, brand differentiation as the nation’s only full-service carrier, and switching costs embedded in its loyalty program. While the upcoming termination of its joint venture with Delta may impact trans-border coordination, its core domestic and global full-service capabilities remain strong.
Cash flow quality is robust, supported by $1.3 billion in operating cash flow and a disciplined capital structure, though shareholders’ equity remains negative and leverage slightly elevated. Management, led by CEO Andrés Conesa, has executed effectively post-restructuring, modernizing the fleet, reclaiming loyalty assets, and returning capital while maintaining operational excellence.
Growth is primarily organic, driven by under-penetrated domestic air travel, fleet upgauging, expansion of Aeromexico Rewards, and near-term catalysts like the 2026 FIFA World Cup. Risks include cyclical recessions, fuel volatility, peso depreciation, and regulatory constraints, but the current market significantly undervalues the airline relative to its structural advantages and operational leverage. At a listing price of $19/ADS versus a fair value near $30/ADS, Aeromexico offers asymmetric upside with a disciplined entry point around $15/ADS, balancing high cyclicality with strong growth potential.
Previously, we covered a bullish thesis on Delta Air Lines, Inc. (DAL) by jaunty_quant in October 2024, which highlighted strong technicals, undervaluation, loyal customers, and diverse revenue streams. DAL’s stock price has appreciated by approximately 20.71% since our coverage. Alexandru Dragut shares a similar view but focuses on Aeromexico’s post-restructuring efficiency, full-service dominance, and strategic advantage at Mexico City Airport.
Grupo Aeromexico, S.A.B. de C.V is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held AERO at the end of the fourth quarter which was 0 in the previous quarter. While we acknowledge the risk and potential of AERO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AERO and that has 10,000% upside potential, check out our report about this cheapest AI stock.
Disclosure: None.
