Market Overview

Volaris Reports Record Third Quarter 2015: 41% Adjusted EBITDAR Margin, 22% Net Income Margin

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MEXICO CITY--(BUSINESS WIRE)--

Volaris* (NYSE: VLRS and BMV: VOLAR), the ultra-low-cost airline serving Mexico, the United States and Central America, today announced its financial results for the third quarter 2015.

*Controladora Vuela Compañía de Aviación, S.A.B. de C.V.

The following financial information, unless otherwise indicated, is presented in accordance with International Financial Reporting Standards (IFRS).

Third Quarter 2015 Highlights

  • Total operating revenues were Ps.5,220 million for the third quarter, an increase of 30.7% year over year.
  • Non-ticket revenues were Ps.1,063 million for the third quarter, an increase of 43.3% year over year. Non-ticket revenue per passenger for the third quarter was Ps.319, increasing 13.2% year over year.
  • Total operating revenue per available seat mile (TRASM) rose to Ps.134.4 cents for the third quarter, an increase of 5.4% year over year.
  • Operating expenses per available seat mile (CASM) were Ps.106.6 cents for the third quarter, a decrease of 8.1% year over year.
  • Adjusted EBITDAR was Ps.2,121 million for the third quarter, an increase of 95.5% year over year with an Adjusted EBITDAR margin of 40.6%, a margin expansion of 13.4 percentage points.
  • Operating income was Ps.1,080 million for the third quarter, with an operating margin of 20.7%, a year over year operating margin improvement of 11.7 percentage points.
  • Net income was Ps.1,152 million (Ps.1.14 per share / US$0.67 per ADS) with a net margin of 22.1% for the third quarter, a year over year net margin improvement of 13.4 percentage points.
  • Net increase of cash and cash equivalents was Ps.380 million for the third quarter, mainly driven by cash flow from operating activities of Ps.243 million. Unrestricted cash and cash equivalents was Ps.4,408 million, representing 26% of the last twelve month total operating revenues.

Volaris´ CEO Enrique Beltranena commented: "During the third quarter Volaris responded to an increase in demand by accelerating its capacity growth, driven by higher fleet utilization thanks to its network flexibility and agility. Volaris' ULCC model continues to penetrate the domestic and international markets, resulting in a strong quarter from commercial, operational and financial standpoints."

Macroeconomic Environment Improves, but FX Volatile. Strong Traffic Volume Growth

  • The Mexican macroeconomic environment:
    • GDP growth for the second quarter 2015 of 2.2% year over year.
    • Consumer confidence increased 4.1%, 1.8% and 0.8% year over year in June, July and August of 2015, respectively.
    • The Mexican General Economic Activity Indicator (IGAE) increased 2.0% year over year in July of 2015.
  • Exchange rate volatility: The Mexican peso depreciated 25.1% year over year against the US dollar, as the exchange rate devalued from an average of Ps.13.11 pesos per US dollar in the third quarter 2014 to Ps.16.41 pesos per US dollar during the third quarter 2015.
  • Lower fuel prices: The average economic fuel cost per gallon decreased 27.2% year over year in the third quarter 2015 to Ps.28.61 per gallon (US$1.68).
  • Air traffic volume increase: The Mexican DGAC reported an overall passenger volume growth for Mexican carriers of 17.1% during July and August 2015 year over year. Domestic passenger volume increased 13.8%, while international increased 30.9%.

Unit Revenue Improvements driven by Non-Ticket Revenue Growth and Improved Revenue Management

  • Unit revenue improvement and demand driven capacity growth: TRASM and yield increased 5.4% and 3.4% for the third quarter year over year, respectively, as a result of a stable domestic and international fare environment. In terms of ASMs, domestic capacity grew 16.8%, reflecting increasing market demand and associated yield recovery, while international capacity increased 44.2%.
  • Non-ticket revenue growth: Non-ticket revenues per passenger increased 13.2% year over year for the third quarter, as the company implemented changes in ancillary products pricing, a new travel insurance product, as well as new payment options.
  • New routes: In the third quarter, Volaris launched five new routes (one domestic and four international).

Operating Revenue Growth from Solid Traffic and Capacity Management

Volaris booked 3.3 million passengers in the third quarter, a 26.6% year over year growth. Volaris traffic (measured in terms of revenue passenger miles, or RPMs) increased 23.6% for the same period. Volaris' passenger market share, the second largest among Mexican carriers and first in the low cost segment, was 25.9% in the bimester of July and August in both domestic and international markets.

Volaris' total operating revenues were Ps.5,220 million in the third quarter, an increase of 30.7% year over year. Non-ticket revenue and non-ticket revenue per passenger reached Ps.1,063 million and Ps.319 in the third quarter, respectively, an increase of 43.3% and 13.2% year over year, respectively.

Fuel Savings Offset Exchange Rate Pressures

In the third quarter, Volaris continued to experience pressures in US-dollar denominated costs such as aircraft rents, international airport costs, and maintenance expenses due to the depreciation of the Mexican peso.

Despite these challenges, the CASM for the third quarter was Ps.106.6 cents, an 8.1% decrease compared to the third quarter 2014, mainly driven by lower fuel prices.

Young and Fuel Efficient Fleet

As of September 30, 2015, Volaris fleet was comprised of 55 aircraft (35 A320s, 18 A319s and 2 A321s), with an average age of 4.4 years. Volaris expects to end the year with 56 aircraft.

Strong Cash Flow Generation, Solid Balance Sheet and Good Liquidity

The net increase of cash and cash equivalents was Ps.380 million during the third quarter, mainly driven by the resources provided by operating activities of Ps.243 million.

As of September 30, 2015, Volaris had a balance of Ps.4,408 million in unrestricted cash and cash equivalents, representing 26% of the last twelve month operating revenues. Volaris recorded negative net debt (or a positive net cash position) of Ps.2,954 million and total equity of Ps.6,196 million.

During the third quarter, Volaris incurred capital expenditures of Ps.262 million, which included pre-delivery payments for acquisition of aircraft and rotable spare parts, furniture and equipment for Ps.244 million and intangibles assets for Ps.18 million. These acquisitions were offset by reimbursements of aircraft pre-delivery payments of Ps.270 million, and proceeds from disposals of rotable spare parts, furniture and equipment of Ps.78 million.

Active in Fuel Risk Management

Volaris has continued to remain active in its fuel risk management program. Volaris hedged 45% of its third quarter fuel consumption at an average strike price of US $2.07 per gallon, which combined with the 55% unhedged consumption, resulted in a blended average economic fuel cost of US$1.68 per gallon for the quarter.

Investors are urged to carefully read the Company's periodic reports filed with or furnished to the Securities and Exchange Commission, for additional information regarding the Company.

Conference Call/Webcast Details:

Volaris will conduct a conference call to discuss these results on October 20, 2015, at 10:00 a.m. EDT (9:00 a.m. Mexico City). A live audio webcast of the conference call will be available to the public on a listen-only basis at http://ir.volaris.com

About Volaris:

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. ("Volaris" or the "Company") (NYSE: VLRS and BMV: VOLAR), is an ultra-low-cost carrier (ULCC), with point-to-point operations, serving Mexico, the United States and Central America. Volaris offers low base fares to build its market, providing quality service and extensive customer choice. Since beginning operations in March 2006, Volaris has increased its routes from five to more than 139 and its fleet from four to 55 aircraft. Volaris offers more than 230 daily flight segments on routes that connect 38 destinations in Mexico, 21 destinations in the United States and 2 in Central America with the youngest aircraft fleet in Mexico. Volaris targets passengers who are visiting friends and relatives, cost-conscious business people and leisure travelers in Mexico and to select destinations in the United States and Central America. Volaris has received the ESR Award for Social Corporate Responsibility for six consecutive years. For more information, please visit: www.volaris.com

Forward-looking Statements:

Statements in this release contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs concerning future events. When used in this release, the words "expects," "estimates," "plans," "anticipates," "indicates," "believes," "forecast," "guidance," "outlook," "may," "will," "should," "seeks," "targets" and similar expressions are intended to identify forward-looking statements. Similarly, statements that describe the Company's objectives, plans or goals, or actions the Company may take in the future, are forward-looking statements. Forward-looking statements include, without limitation, statements regarding the Company's intentions and expectations regarding the delivery schedule of aircraft on order, announced new service routes and customer savings programs. All forward-looking statements in this release are based upon information available to the Company on the date of this release. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements are subject to a number of factors that could cause the Company's actual results to differ materially from the Company's expectations, including the competitive environment in the airline industry; the Company's ability to keep costs low; changes in fuel costs; the impact of worldwide economic conditions on customer travel behavior; the Company's ability to generate non-ticket revenues; and government regulation. Additional information concerning these and other factors is contained in the Company's Securities and Exchange Commission filings.

 

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries

Financial and Operating Indicators

       
Unaudited

Three months
ended September
30, 2015

Three months
ended
September 30,
2015

Three months
ended
September 30,
2014

Variance
(In Mexican pesos, except otherwise indicated) (US Dollars)* (%)
Total operating revenues (millions) 307 5,220 3,995 30.7%

Total operating expenses (millions)

243 4,140 3,634 13.9%

EBIT (millions)

63 1,080 361 >100%
EBIT margin 20.7% 20.7% 9.0% 11.7 pp
Adjusted EBITDA (millions) 71 1,200 447 >100%
Adjusted EBITDA margin 23.0% 23.0% 11.2% 11.8 pp
Adjusted EBITDAR (millions) 125 2,121 1,085 95.5%
Adjusted EBITDAR margin 40.6% 40.6% 27.2% 13.4 pp
Net income (millions) 68 1,152 347 >100%
Net income margin 22.1% 22.1% 8.7% 13.4 pp
Earnings per share:
Basic (pesos) 0.07 1.14 0.34 >100%
Diluted (pesos) 0.07 1.14 0.34 >100%
Earnings per ADS:
Basic (pesos) 0.67 11.38 3.43 >100%
Diluted (pesos) 0.67 11.38 3.43 >100%
Weighted average shares outstanding:
Basic - 1,011,876,677 1,011,876,677 0.0%
Diluted   -   1,011,876,677   1,011,876,677   0.0%

Available seat miles (ASMs) (millions)(1)

- 3,883 3,132 24.0%

Domestic

- 2,699 2,310 16.8%
International - 1,184 821 44.2%

Revenue passenger miles (RPMs) (millions)(1)

- 3,226 2,611 23.6%
Domestic - 2,242 1,901 18.0%
International - 984 710 38.6%

Load factor(2)

- 83.1% 83.4% (0.3) pp
Domestic - 83.1% 82.3% 0.8 pp
International   -   83.0%   86.5%   (3.5) pp

Total operating revenue per ASM (TRASM) (cents)(1)

7.9 134.4 127.6 5.4%

Passenger revenue per ASM (RASM) (cents)(1)

6.3 107.0 103.9 3.1%

Passenger revenue per RPM (Yield) (cents)(1)

7.6 128.8 124.6 3.4%

Average fare(2)

73.3 1,247 1,233 1.1%

Non-ticket revenue per passenger (1)

18.7 319 281 13.2%

Non-ticket revenue excluding cargo per passenger(1)

17.9 305 261 16.7%

Operating expenses per ASM (CASM) (cents)(1)

6.3 106.6 116.0 (8.1%)

Operating expenses per ASM (CASM) (US cents)(1)

- 6.3* 8.6** (27.3%)

CASM ex fuel (cents)(1)

4.3 73.1 69.6 5.1%

CASM ex fuel (US cents)(1)

  -   4.3*   5.2**   (16.9%)

Booked passengers (thousands)(1)

- 3,338 2,638 26.6%

Departures(1)

- 24,087 19,862 21.3%

Block hours(1)

- 62,878 51,894 21.2%
Fuel gallons consumed (millions) - 45.5 37.0 23.0%
Average economic fuel cost per gallon 1.7 28.6 39.3 (27.2%)
Aircraft at end of period - 55 48 14.6%
Average aircraft utilization (block hours) - 13.1 12.5 5.3%
Average exchange rate   -   16.40   13.11   25.1%
*Peso amounts were converted to U.S. dollars at the rate of Ps.17.0073 for convenience purposes only
**Peso amounts were converted to U.S. dollars at the rate of Ps.13.4541 for convenience purposes only
(1) Includes schedule + charter (2) Includes schedule
 

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries

Financial and Operating Indicators

       
Unaudited

Nine months
ended September
30, 2015

Nine months
ended
September
30, 2015

Nine months
ended
September 30,
2014

Variance
(In Mexican pesos, except otherwise indicated) (US Dollars)* (%)
Total operating revenues (millions) 770 13,087 10,078 29.9%

Total operating expenses (millions)

665 11,312 10,301 9.8%
EBIT (millions) 104 1,775 (222) NA
EBIT margin 13.6% 13.6% (2.2%) 15.8 pp
Adjusted EBITDA (millions) 125 2,124 (17) NA
Adjusted EBITDA margin 16.2% 16.2% (0.2%) 16.4 pp
Adjusted EBITDAR (millions) 271 4,606 1,842 >100%
Adjusted EBITDAR margin 35.2% 35.2% 18.3% 16.9 pp
Net income (loss) (millions) 106 1,810 (98) NA
Net income (loss) margin 13.8% 13.8% (1.0%) 14.8 pp
Earnings per share:
Basic (pesos) 0.11 1.79 (0.10) NA
Diluted (pesos) 0.11 1.79 (0.10) NA
Earnings per ADS:
Basic (pesos) 1.05 17.89 (0.97) NA
Diluted (pesos) 1.05 17.89 (0.97) NA
Weighted average shares outstanding:
Basic - 1,011,876,677 1,011,876,677 0.0%
Diluted   -   1,011,876,677   1,011,876,677   0.0%

Available seat miles (ASMs) (millions)(1)

- 10,258 8,797 16.6%
Domestic - 7,188 6,558 9.6%
International - 3,070 2,239 37.1%

Revenue passenger miles (RPMs) (millions)(1)

- 8,425 7,211 16.8%
Domestic - 5,905 5,304 11.3%
International - 2,520 1,907 32.2%

Load factor(2)

- 82.1% 82.0% 0.1 pp

Domestic

- 82.1% 80.9% 1.3 pp
International   -   82.0%   85.2%   (3.2) pp

Total operating revenue per ASM (TRASM) (cents)(1)

7.5 127.6 114.6 11.4%

Passenger revenue per ASM (RASM) (cents)(1)

5.8 99.4 92.8 7.2%

Passenger revenue per RPM (Yield) (cents)(1)

7.1 121.1 113.2 6.9%

Average fare(2)

69 1,171 1,135 3.1%

Non-ticket revenue per passenger (1)

19.4 331 266 24.2%

Non-ticket revenue excluding cargo per passenger(1)

18.5 315 242 29.9%

Operating expenses per ASM (CASM) (cents)(1)

6.5 110.3 117.1 (5.8%)

Operating expenses per ASM (CASM) (US cents)(1)

- 6.5* 8.7 ** (25.5%)

CASM ex fuel (cents)(1)

4.4 75.5 70.6 7.0%

CASM ex fuel (US cents)(1)

  -   4.4*   5.2**   (15.4%)

Booked passengers (thousands)(1)

- 8,730 7,192 21.4%

Departures(1)

- 64,587 55,183 17.0%

Block hours(1)

- 168,641 145,945 15.6%
Fuel gallons consumed (millions) - 119.9 102.7 16.7%
Average economic fuel cost per gallon 1.7 29.7 39.8 (25.3%)
Aircraft at end of period - 55 48 14.6%
Average aircraft utilization (block hours) - 12.6 12.4 1.3%
Average exchange rate   -   15.55   13.12   18.6%
*Peso amounts were converted to U.S. dollars at the rate of Ps.17.0073 for convenience purposes only.
**Peso amounts were converted to U.S. dollars at the rate of Ps.13.4541 for convenience purposes only.
(1) Includes schedule + charter (2) Includes schedule
 

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries

Consolidated Statement of Operations

       
Unaudited

Three months
ended September
30, 2015

Three months
ended
September 30,
2015

Three months
ended
September 30,
2014

Variance
(In millions of Mexican pesos) (US Dollars)* (%)
Operating revenues:
Passenger 244 4,156 3,253 27.8%
Non-ticket 63 1,063 742 43.3%
307 5,220 3,995 30.7%
 
Other operating income (5) (82) (5) >100%
Fuel 77 1,303 1,455 (10.5%)
Aircraft and engine rent expense 54 921 637 44.5%
Landing, take-off and navigation expenses 41 703 532 32.3%
Salaries and benefits 29 492 395 24.5%
Sales, marketing and distribution expenses 18 303 238 27.2%
Maintenance expenses 12 208 167 24.5%
Other operating expenses 10 172 127 35.3%
Depreciation and amortization 7 121 87 39.4%
Operating expenses 243 4,140 3,634 13.9%
 
Operating income 63 1,080 361 >100%
 
Finance income 1 15 7 >100%
Finance cost - (5) (9) (47.4%)
Exchange gain, net 33 556 116 >100%
Comprehensive financing result 34 566 113 >100%
 
Income before income tax 97 1,646 474 >100%
Income tax expense (29) (494) (127) >100%
Net income   68   1,152   347   >100%
*Peso amounts were converted to U.S. dollars at the rate of Ps.17.0073 for convenience purposes only.
 

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries

Consolidated Statement of Operations

       
Unaudited

Nine months
ended September
30, 2015

Nine months
ended
September 30,
2015

Nine months
ended
September 30,
2014

Variance
(In millions of Mexican pesos) (US Dollars)* (%)
Operating revenues:
Passenger 600 10,201 8,163 25.0%
Non-ticket 170 2,887 1,915 50.7%
770 13,087 10,078 29.9%
 
Other operating income (8) (143) (9) >100%
Fuel 209 3,563 4,088 (12.8%)
Aircraft and engine rent expense 146 2,483 1,860 33.5%
Landing, take-off and navigation expenses 111 1,884 1,577 19.4%
Salaries and benefits 80 1,364 1,174 16.2%
Sales, marketing and distribution expenses 44 750 590 27.1%
Maintenance expenses 35 587 473 24.1%
Other operating expenses 28 476 342 39.0%
Depreciation and amortization 21 349 205 70.2%
Operating expenses 665 11,312 10,301 9.8%
 
Operating income (loss) 104 1,775 (222) NA
 
Finance income 2 37 17 >100%
Finance cost (1) (15) (23) (36.3%)
Exchange gain, net 46 789 112 >100%
Comprehensive financing result 48 811 106 >100%
 
Income (loss) before income tax 152 2,586 (116) NA
Income tax (expense) benefit (46) (776) 18 NA
Net income (loss)   106   1,810   (98)   NA
*Peso amounts were converted to U.S. dollars at the rate of Ps.17.0073 for convenience purposes only.
 

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries

Consolidated Statement of Financial Position

     
(In millions of Mexican pesos)

September 30, 2015
Unaudited

September 30, 2015
Unaudited

December 31, 2014
Audited

(US Dollars)*
Assets
Cash and cash equivalents 259 4,408 2,265
Accounts receivable 17 295 449
Inventories 9 156 140
Prepaid expenses and other current assets 20 342 228
Financial instruments 2 40 63
Guarantee deposits 40 680 545
Total current assets 348 5,921 3,689
Rotable spare parts, furniture and equipment, net 134 2,273 2,223
Intangible assets, net 5 77 73
Financial instruments 4 65 5
Deferred income tax 39 661 328
Guarantee deposits 275 4,680 3,541
Other assets 4 66 46
Total non-current assets 460 7,822 6,216
Total assets 808 13,743 9,905
Liabilities
Unearned transportation revenue 112 1,898 1,421
Accounts payable 42 710 506
Accrued liabilities 73 1,237 1,122
Taxes and fees payable 103 1,745 677
Financial instruments 3 48 211
Financial debt 67 1,145 823
Other liabilities - 5 9
Total short-term liabilities 399 6,789 4,768
Financial instruments 1 23 42
Financial debt 18 309 425
Accrued liabilities 11 192 144
Other liabilities 2 42 21
Employee benefits 1 10 8
Deferred income tax 11 181 27
Total long-term liabilities 45 757 667
Total liabilities 444 7,546 5,435
Equity
Capital stock 175 2,974 2,974
Treasury shares (7) (115) (115)
Contributions for future capital increases - - -
Legal reserve 2 38 38
Additional paid-in capital 105 1,790 1,787
Accumulated incomes (losses) 103 1,754 (56)
Accumulated other comprehensive losses (14) (245) (158)
Total equity 364 6,196 4,470
Total liabilities and equity 808 13,743 9,905
 
Total shares outstanding fully diluted       1,011,876,677   1,011,876,677
*Peso amounts were converted to U.S. dollars at the rate of Ps.17.0073 for convenience purposes only
 

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries

Consolidated Statement of Cash Flows – Cash Flow Data Summary

     
Unaudited

Three months
ended September
30, 2015

Three months
ended
September 30,
2015

Three months
ended
September 30,
2014

(In millions of Mexican pesos) (US Dollars)*
Net cash flow provided by (used in) operating activities 14 243 (42)
Net cash flow provided by (used in) investing activities 5 86 (370)
Net cash flow (used in) provided by financing activities (10) (176) 96
Increase (decrease) in cash and cash equivalents 9 154 (316)
Net foreign exchange differences 13 226 42
Cash and cash equivalents at beginning of period 237 4,028 2,088
Cash and cash equivalents at end of period   259   4,408   1,814
 
*Peso amounts were converted to U.S. dollars at the rate of Ps.17.0073 for convenience purposes only
 
Unaudited

Nine months
ended September
30, 2015

Nine months
ended
September 30,
2015

Nine months
ended September
30, 2014

(In millions of Mexican pesos) (US Dollars)*
Net cash flow provided by (used in) operating activities 126 2,140 (136)
Net cash flow used in investing activities (14) (245) (813)
Net cash flow (used in) provided by financing activities (4) (61) 280
Increase (decrease) in cash and cash equivalents 108 1,833 (669)
Net foreign exchange differences 18 309 32
Cash and cash equivalents at beginning of period 133 2,265 2,451
Cash and cash equivalents at end of period   259   4,408   1,814
 
*Peso amounts were converted to U.S. dollars at the rate of Ps.17.0073 for convenience purposes only

for Volaris
Investor Relations:
Andrés Pliego, +52-55-5261-6444
Investor Relations
ir@volaris.com
or
Media:
Cynthia Llanos, +52-1-55-4577-0803
cllanos@gcya.net

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