BOGOTA, Colombia--(BUSINESS WIRE)--Avianca Holdings S.A., (NYSE: AVH) (BVC: PFAVH), the following results pertain to the 1Q of 2014. Financial and operational information is provided in millions of US dollars, except when IFRS financial information to IFRS financial information included in financial tables section of this report. Except when noted, all comparisons refer to first quarter 2013 (1Q 2013) numbers. Figures and operating metrics of Avianca Holdings S.A. (“Avianca”, “the Company”, “Issuer Entity” or “Issuer”) are presented on a consolidated basis.
| AVIANCA HOLDINGS S.A. | ||||
| Financial Highlights | ||||
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(First 3 months ended Mar. 31st) |
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| 1Q-13 | 1Q-14 | |||
| Revenues | 1.1 bn | 1.1bn | ||
| EBITDAR | 200.8 | 161.8 | ||
| EBITDAR* | 201.4 | 166.5 | ||
| EBIT | 102.8 | 50.0 | ||
| EBIT* | 103.4 | 57.2 | ||
| Net Income | 77.2 | 123 | ||
| Net income* | 69.7 | 31.6 | ||
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*Excluding Special Items |
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Profitability (First 3 months ended Mar. 31st) |
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| 1Q-13 | 1Q-14 | |||
| EBITDAR % | 18.0% | 14.7% | ||
| EBITDAR %* | 18.0% | 15.2% | ||
| EBIT % | 9.2% | 4.6% | ||
| EBIT %* | 9.2% | 5.2% | ||
| Net income % | 7.0% | 1.5% | ||
| Net Income%* | 6.2% | 2.9% | ||
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*Excluding Special Items |
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Operational Highlights (First 3 months ended Mar. 31st) |
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| 1Q-13 | 1Q-14 | |||
| Passengers | 6.0m | 6.2m | ||
| ASKs | 9.4b | 9.5b | ||
| RPKs | 7.6b | 7.7b | ||
| Load Factor | 80.8% | 78.4% | ||
| RASK | 12.0 | 11.1 | ||
| CASK* | 10.9 | 10.6 | ||
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*Excluding Special Items and |
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First quarter 2014 Highlights
- Avianca Holdings would have earned an adjusted net income of $31.6 million, excluding special items. Our adjusted net income margin came in at 2.9%.
- Operating revenues amounted to $1.099 billion, down 1.7% over 1Q 2013, mainly due to a 2.2% decrease in passenger revenues, driven by a yield decline of 4.4%, which was partially offset by a 3.3% growth in passenger carried. In line with our cargo capacity expansion and improved capacity utilization, Cargo and other revenues increased by 0.5%. As a result cargo load factor increased by 100 basis points.
- Adjusted cost per available seat kilometer (CASK) for the period dropped by 2.7%, reflecting the successful implementation of the cost control initiatives.
- Adjusted EBITDAR was $166.5 million, while the EBITDAR margin reached 15.2%.
- Operating income excluding special items (EBIT) totaled $57.2 million, as a result the operating margin for 1Q 2014 was 5.2%.
- Capacity, measured in ASKs (available seat kilometers), increased by 5.5% during 1Q 2014, mostly due to the continued expansion in our home markets and the addition of larger aircrafts. Furthermore, passenger traffic, measured in RPKs (revenue passenger kilometers), grew 2.3%, reaching a consolidated load factor of 78.4%.
- In accordance with the fleet renovation and modernization plan, between January and March 2014, the company took delivery of two A321 aircraft, one A319 aircraft, all equipped with sharklets, and two ATR72 aircraft, while grounding and phasing-out six Fokker 50 and two A321, respectively. As a result, Avianca Holdings S.A. and subsidiaries ended the quarter with a consolidated operating fleet of 152 aircraft.
CEO´s Comment
During the first three months of 2014, Avianca Holdings S.A. began an adjustment and transition process which allowed us to continue our consolidation strategy towards becoming one of the most efficient and profitable companies in the airline industry. The first quarter was characterized by a handful of challenges that we are successfully managing and expect to overcome this year. Despite of the impact said challenges had and are expected to have on the short term results, we are confident in our strategy and we to continue to focus on our long term growth targets. Even though we certainly want to service the Venezuelan market, we have earnestly evaluated the risk associated with this operation. Our responsibility towards our shareholders is to minimize the impact on the Company, consequently we have reduced our service from 7 daily flights, to 1 daily flight from Bogota to Caracas and one daily flight from Lima to Caracas. The results recorded in the January to March period exemplify the challenges presented by Venezuela which forced us to rationalize capacity in this market. However, given our operating flexibility and Avianca’s positioning in local markets, we are transferring capacity elsewhere, such as to the domestic markets in Colombia, in addition to continuing our expansion within the North America network. Latin America continues to represent a niche for the expansion of our business derived mostly by the economic growth in countries like Peru and Colombia, where we are leaders and we see the possibility to further expand our business operation. Furthermore, it is worthwhile mentioning that the efficient redeployment of capacity has a maturation cycle of between 6 to 12 months. Hence, it will take time to attain similar levels of profitability as those observed in the Venezuelan market. As a result we have strengthened our cost reduction initiatives that we expect to deliver approximately 10 basis points of our total costs, by year end.
During the first quarter of 2014, Avianca Holdings S.A. and its subsidiaries registered a net operating revenues of $ 1.099 billion, a reduction of 1.7% compared to the same quarter of 2013. In terms of the adjusted operating profit, it amounted to $57.2 million, resulting in an operating margin of 5.2%.
The results of the quarter mainly reflect the seasonality of our business and the capacity rationalization in Venezuela, in addition to the incorporation of new aircrafts to our fleet through our fleet renovation and modernization plan. Among the acquisitions made in the quarter are two ATR 72s to replace the F50 fleet, which also impacted some of our routes and contributed to the strategy of transferring capacity to other markets. The operating decisions made during the quarter affected the short term results, but have allowed us to better position ourselves for the long term and focus on increasing our future profitability. The transitory reduction of the fleet has allowed us to examine closely our regional routes and seek new markets that are underserved as well as connect new routes in order to take advantage of the new ATRs, which will be fully incorporated by the end of the year and positively impact future results. We trust that our efforts and operational changes will translate in a better market positioning for Avianca, especially among the global airlines, and will contribute to increased productivity and returns for our shareholders.
As part of our fleet renovation and modernization process, Avianca Holdings has added, through its subsidiaries, 5 new aircrafts while grounding six F50 and one A321 while phasing out one A321 aircraft. As a result our operating fleet ended the quarter with 152 aircraft and we expect to add additional equipment to allow us to grow our fleet by 14% over the next five years. Furthermore, and as part of our efforts to expand our network, we added 13 incremental frequencies with in the domestic Colombian market and Central America. Moreover we began the commercialization of the Bogota - London route which will begin operating in July 3rd of this year.
As we expected at the end of 2013, this year will be a year of challenges, but also opportunities and we at Avianca are prepared to seize growth opportunities, deliver results and create value for our shareholders.
Sincerely,
Fabio Villegas Ramirez
Chief Executive Officer
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Consolidated Financial and Operating Highlights |
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| Performance Driver | IQ-13 | IQ-14 | ∆ Vs. IQ-13 | ||||||||
| ASK's (mm) | 9,351 | 9,861 | 5.5 | % | |||||||
| RPK's (mm) | 7,559 | 7,734 | 2.3 | % | |||||||
| Total Passengers (in millions) | 5,993 | 6,189 | 3.3 | % | |||||||
| Load Factor | 80.8 | % | 78.4 | % | -2.4 | % | |||||
| Departures | 63,418 | 68,148 | 7.5 | % | |||||||
| Block Hours | 117,767 | 124,047 | 5.3 | % | |||||||
| Stage length (km) | 1,234 | 1,240 | 0.5 | % | |||||||
| Fuel Consumption Gallons (000's) | 96,975 | 102,636 | 5.8 | % | |||||||
| Yield (cents) | 12.4 | 11.9 | -4.4 | % | |||||||
| RASK (cents) | 12.0 | 11.1 | -6.8 | % | |||||||
| PRASK (cents) | 10.0 | 9.3 | -7.2 | % | |||||||
| CASK (cents) | 10.9 | 10.6 | -2.1 | % | |||||||
| CASK ex, Fuel (cents) | 7.2 | 7.2 | 0.0 | % | |||||||
| CASK Adjusted (cents) (1) | 10.9 | 10.6 | -2.7 | % | |||||||
| CASK ex, Fuel Adjusted (cents) (1) | 7.2 | 7.1 | -1.0 | % | |||||||
| Foreign exchange (average) COP/US$ | $ | 1,791.3 | $ | 2,005.2 | 11.9 | % | |||||
| Foreign exchange (end of period) COP/US$ | $ | 1,832.2 | $ | 1,965.3 | 7.3 | % | |||||
| WTI (average) per barrel | $ | 94.3 | $ | 98.7 | 4.7 | % | |||||
| Jet Fuel Crack (average) per barrel | $ | 35.6 | $ | 24.1 | -32.2 | % | |||||
| US Gulf Coast ( Jet Fuel average) per barrel | $ | 129.9 | $ | 122.9 | -5.4 | % | |||||
| Fuel price per Gallon (including hedge) | $ | 3.50 | $ | 3.28 | -6.4 | % | |||||
| Operating Revenues ($M) | $ | 1,118.0 | $ | 1,098.5 | -1.7 | % | |||||
| EBITDAR ($M) | $ | 200.8 | $ | 161.8 | -19.4 | % | |||||
| EBITDAR Margin | 18.0 | % | 14.7 | % | -3.2 | % | |||||
| EBITDA ($M) | $ | 134.9 | $ | 91.0 | -32.5 | % | |||||
| EBITDA Margin | 12.1 | % | 8.3 | % | -3.8 | % | |||||
| Operating Income ($M) | $ | 102.8 | $ | 50.0 | -51.3 | % | |||||
| Operating Margin ($M) | 9.2 | % | 4.6 | % | -4.6 | % | |||||
| Net Income ($M) | $ | 77.2 | $ | 12.3 | -84.1 | % | |||||
| Net Income Margin | 6.9 | % | 1.1 | % | -5.8 | % | |||||
| EBITDAR (Adjusted) (1) ($M) | $ | 201.4 | $ | 166.5 | -17.3 | % | |||||
| EBITDAR Margin (Adjusted) (1) | 18.0 | % | 15.2 | % | -2.8 | % | |||||
| EBITDA (Adjusted) (1) ($M) | $ | 135.5 | $ | 95.7 | -29.4 | % | |||||
| EBITDA Margin (Adjusted) (1) | 12.1 | % | 8.7 | % | -3.8 | % | |||||
| Operating Income ($M) (Adjusted) (1) | $ | 103.4 | $ | 57.2 | -47.2 | % | |||||
| Operating Margin (Adjusted) (1) | 9.2 | % | 5,2 | % | -4.2 | % | |||||
| Adjusted Net Income ($M) (2) | $ | 69.7 | $ | 31.6 | -58.3 | % | |||||
| Net Income Margin (Adjusted) (2) | 6.2 | % | 2.9 | % | -3.5 | % | |||||
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(Adjusted: Excluding non-cash Fx charges, gain or loss on assets as well as derivative instruments and one-time expenses associated to the phasing out of aircraft) |
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MANAGEMENT COMMENTS ON 1Q 2014 RESULTS
Avianca Holdings reached an adjusted operating income (EBIT) of $57.2 million for 1Q 2014, while the adjusted net operating income (EBIT) margin came in at 5.2%. These figures reflect a 4.4% yield decline, despite the increase in passengers carried, as a result of the reduction and simultaneous redeployment of our capacity, expressed in ASKs, from Venezuela to other markets. Consequently these measures had, and are anticipated to have an effect on Avianca’s short term profitability, as incremental frequencies to other markets are expected to mature by year end. As such the optimization of our integrated network strategy, aims to cap our exposure to the Venezuelan Bolivar and continue to diversify our sources of revenue. All these efforts aim to an increase in efficiency and control over our operational and administrative costs to further sustain and expand our profitability.
Operating revenues amounted to approximately $1.099 billion during the period. This represents a decrease of 1.7% over the same quarter in 2013. The results are primarily due to a 2.2% decline in passenger revenues as a result of a 4.4% yield decrease, partially offset by a 3.3% increase in the number of total passengers carried, increasing from 6.0 million in the first quarter of 2013 to 6.2 million in the first quarter of 2014. The aforementioned results were achieved despite of the capacity rationalization to Venezuela, further redeployment to other markets as well as the grounding of the F-50 fleet. Furthermore our cargo and other revenues represented 16.5% of our total revenues and amounted to $181.3 million. This represents an increase of 0.5% over the first quarter of 2013 mostly driven by a rise of 6.7% of our cargo revenues due to a growth of 21.0% in in ATKs as well as an increase in RTKs of 25.0% over 1Q 2013, as a result the cargo Load Factor for the quarter increased 100 basis points reaching 59%.
The company continued to expand its network through the domestic operations in the Colombian domestic market as well as increase the connectivity among its home markets (Colombia, El Salvador, Peru and Ecuador) and international network in Central America. Therefore the company added six additional weekly frequencies to the Bogota – Cucuta route as well as seven to the San Jose – Guatemala route. Consequently passenger capacity expressed in ASKs increased 5.5% over the same period in 2013, partially offset by a net capacity reduction of 3.4% in South America reflecting our revised strategy in Venezuela
Operating expenses for the first quarter of 2014 increased 3.3% amounting to $1.049 billion. These results include a 1.0% decrease in fuel costs related to a 6.4% reduction of “into-plane” fuel costs explained by a 5.4% reduction of jet fuel prices that were partially offset by an increase in the consumption of fuel (as measured in gallons) of 5.8%. Operating expenses were affected by a one-time maintenance cost of $4.2 million related to the grounding of the turboprop F-50 fleet, $0.5 million loss on sale of property and equipment as well as $2.5 million related to provisions of aircraft return conditions. Excluding these items, operating expenses grew by 2.6%.
As part of the company’s on-going fuel hedging strategy, by the end of first quarter of 2014, 131 million gallons, which represent approximately 32% of the total expected volume to be consumed over the next twelve months, were hedged at an average price of $ 2.90 / Gallon as follows: approximately 38% for 2Q 2014, 37% for 3Q 2014, 31% for 4Q 2014 through heating oil options and swaps and 22% for 1Q 2015 through jet fuel swaps.
In accordance with the fleet renovation and modernization plan, between January and March 2014, the Company took delivery of five new aircraft: two A321 and one A319 aircraft, all equipped with sharklets and two ATR72 turboprop aircraft, while grounding six Fokker 50 and one A321 aircraft and phasing out one A321. As a result, Avianca Holdings S.A. and subsidiaries ended the quarter with a consolidated operating fleet of 152 aircraft.
The company recorded other non-operating expenses of $34.8 million for the first quarter 2014, compared to $12.5 million for the same quarter of 2013. Non-operating expenses include interest expenses related to incremental aircraft debt and additional debt service related to the bond placement carried in the first quarter of 2013, which amount to $25.3 million compared to $24.6 million in 1Q 2013. In addition The Company registered a net loss related to the foreign exchange non-cash translation adjustments of $14.8 million compared to a net gain of $13.6 million for the same period of 2013. The difference is primarily due to a loss in foreign exchange translation adjustments, consisting of the net non-cash gain or loss from our monetary assets and liabilities denominated in Colombian pesos as well as the bolivar denominated cash balances, subject to the USD exchange rate.
The company’s balance sheet cash and cash equivalents and available for sale securities ended 1Q 2014 at $588.6 million, represent 12.8% of the last twelve month’s revenues. Including PDP payments and short term investments throughout the 1Q 2014, adjusted cash and cash equivalents and available for sale securities came in at $659.0 million. This represents 14.4% of last twelve month revenues. Of such cash $318.9 million were subject to exchange controls in Venezuela and were pending repatriation. During the period we disbursed cash related to the purchase of two ATRs, which were incorporated during the first quarter. Due to the mismatch between the second ATR delivery and settlement of the financing conditions, we expect to collect $13.5 million over the course of the 2Q2014. Furthermore the company´s leverage position (Net Adjusted debt to EBITDAR1) increased from 4.1x in December 2013 to 4.7x in March 2014. This increase is mainly due to short term effects related to the reorganization of the network as well as non-cash one-time expenses related to the F-50 fleet grounding, which temporarily affect our short term profitability. Finally, on April 8th 2014 the company reopened its REGs 144a 2020 bond issuance for a nominal amount of $250 million.
1Net Adjusted Debt to EBITDAR: (Current Portion of Long Term debt + Long Term Debt + (Annual Rents Expense x 7) – Cash*) / EBITDAR
*Cash: Cash and cash equivalents + Restricted Cash + Available for sale securities + Short Term Certificates of bank deposits + Long Term Restricted Cash
2014 - OUTLOOK
Avianca Holdings S.A., through its affiliated airlines, revises its 2014 FY outlook to 8.0% - 9.0% in terms of capacity growth and 7.0% - 8.0% in terms of passengers carried over 2013. Finally, the projected average Load Factor for the year is expected to stand between 77% - 79%.
In terms of operating profitability, despite the network realignment, the Company expects to report operating margins between 5.0% and 7.0%, as a result of the increased investments and costs related to the grounding and incorporation of fleet along with the different initiatives related to capacity redeployment as part of the recent development in the Venezuelan market.
| Outlook Summary | Full Year 2014 | |
| Total Passengers Increase from 2013 | 8% - 9% | |
| Capacity (ASK'S) Increase from 2013 | 7% - 8% | |
| Load Factor | 77% - 79% | |
| EBIT Margin | 5% - 7% | |
CONSOLIDATED FINANCIAL RESULTS
Operating revenue
Our operating revenue amounted to $1.099 billion in 1Q 2014, a 1.7% decrease over $1.118 billion in 1Q 2013, as a result of a $20.3 million reduction in passenger revenue mainly due to a 4.4% yield decrease, despite an increase of 3.3% passenger volume and a $ 0.9 million increase in revenues from cargo and other related mainly to our cargo operation as a result of incorporating a younger fleet. Our operating revenue per ASK came in at 11.14 cents in 1Q 2014 versus 11.96 cents in 1Q 2013.
Passenger revenue. Our passenger revenue was $917.3 million in 1Q 2014, a 2.2% decrease over $937.5 million in 1Q 2013, primarily as a result of a decrease in the average fare, which was partially offset by a 3.3% increase in passengers carried from 6.0 million in 1Q 2013 to 6.2 million in 1Q 2014. As a result passenger load factor came in at 78.4%.
Cargo and other. Our revenue from cargo and other was $181.3 million in 1Q 2014, a 0.5% increase from $180.4 million in 1Q 2013, primarily as a result of a 25% increase in cargo traffic (RTKs) and a 21% rise in capacity (ATKs) due to the improved usage of our renewed cargo fleet that was incorporated throughout 2013. As a result the Load factor for the quarter came in at 59%, increasing 100 bp over the same period in 2013.
Operating expenses
Operating expenses were $1.05 billion in 1Q 2014, a 3.3% increase over $1.02 billion in 1Q 2013, primarily as a result of a $12.7 million increase of costs associated to the promotion of our cargo services as well as a higher expenses associated to larger cargo handling volume. Furthermore we had incremental depreciation and amortization expenses associated to 10 additional aircraft that were incorporated since March 2013, the one-time maintenance expense ($4.2 million) associated to the grounding of the F-50 fleet as well as $2.5 million related to provisions of aircraft return conditions. Excluding these items, operating expenses/costs grew 2.6%.
As a result, our CASK excluding fuel and special items decreased -1.0% in 1Q 2014. The breakdown of operating expenses per available seat kilometer (CASK) is as follows:
| Analysis by ASK's | 1Q 13 | 1Q 14 | VAR% | |||
| Operating revenue: | ||||||
| Passenger | 10,03 | 9.30 | -7.2% | |||
| Cargo and other | 1.93 | 1.84 | -4.7% | |||
| Total operating revenues | 11.96 | 11.14 | -6.8% | |||
| Operating expenses: | ||||||
| Flight operations | 0.21 | 0.19 | -10.8% | |||
| Aircraft fuel | 3.63 | 3.41 | -6.1% | |||
| Ground operations | 0.84 | 0.89 | 5.7% | |||
| Aircraft rentals | 0.71 | 0.72 | 1.8% | |||
| Passenger services | 0.35 | 0.36 | 2.7% | |||
| Maintenance and repairs | 0.52 | 0.58 | 11.5% | |||
| Air traffic | 0.49 | 0.42 | -14.5% | |||
| Sales and marketing | 1.43 | 1.49 | 3.8% | |||
| General, Administrative, and other | 0.55 | 0.53 | -3.0% | |||
| Salaries, wages and benefits | 1.78 | 1.63 | -8.4% | |||
| Depreciation and amortization | 0.34 | 0.42 | 21.2% | |||
| Total operating expense | 10.86 | 10.63 | -2.1% | |||
| Operating income | 1.10 | 0.51 | -53.9% | |||
| Total CASK | 10.86 | 10.63 | -2.1% | |||
| CASK ex. Fuel | 7.22 | 7.22 | 0.0% | |||
| Total CASK Adjusted | 10.85 | 10.6 | -2.5% | |||
| CASK ex. Fuel Adjusted | 7.22 | 7.2 | -1.0% | |||
Flight operations. Flight operations expense was $18.4 million in 1Q 2014, a 5.9% decrease over $19.6 million in 1Q 2013, mainly as a result of a reduction of technical assistance expenses related to the call center services provided by a subsidiary of the holding company, and partially offset by an increase in pilot training expenses related to the new fleet of A320, A330 and ATR72 aircraft. In terms of unit cost per ASK, flight operations decreased 10.8% from 0.21 in 1Q 2013 to 0.19 in 1Q 2014.
Fuel. Fuel expense was $336.6 million in 1Q 2014, a 1.0% decrease over $339.8 million in 1Q 2013, primarily as a result of 5.8% increase in fuel consumption (gallons), partially offset by a 6.4% decrease in our average “into-plane” fuel cost (fuel price plus taxes and distribution costs), from $3.5 per gallon in 1Q 2013 to $3.3 per gallon in 1Q 2014. The cost of fuel per ASK decreased 6.1% in 1Q 2014 as a result of the foregoing.
Ground operations. Ground operations expense was $87.6 million in 1Q 2014, an 11.4% increase over $78.6 million in 1Q 2013, primarily driven by an increase in prices for landing and ramp services associated to a 7.5% increase in cycles. Additionally, the increase reflects higher expenses for cargo handling services as well as additional expenses for cargo security services in certain airports related to the increase in the cargo operation. In terms of unit cost per ASK, ground operations rose 5.7% from 0.84 in 1Q 2013 to 0.89 in 1Q 2014.
Aircraft rentals. Aircraft rentals expense was $70.8 million in 1Q 2014, a 7.4% increase over $65.9 million in 1Q 2013, primarily as a result of the incorporation of new aircraft (three A320, one A330, one A321 and one additional month of an A320), partially offset by the phase-out of one A319 aircraft, one A321 aircraft and one engine lease for the 767F fleet. In terms of unit cost per ASK, aircraft rentals increased 1.8% from 0.71 in 1Q 2013 to 0.72 in 1Q 2014.
Passenger services. Passenger services expense was $35.5 million in 1Q 2014, an 8.3% increase over $32.8 million in 1Q 2013, primarily as a result of a 3.3% increase in passengers carried resulting in additional expenses for VIP lounges, onboard food and beverages as well as higher costs in handling and onboard supplies. In terms of unit cost per ASK, passenger services increased 2.7% from 0.35 to 0.36 in 1Q 2014.
Maintenance and repairs. Maintenance and repairs expense was $57.4 million in 1Q 2014, a 17.5% increase over $48.8 million in 1Q 2013, primarily as a result of higher maintenance costs for aircraft and APUs (alternate power units), and a one-time expense of $4.2 million associated to the inventory write-off related to the grounding of the F-50 fleet. These expenses were partially offset by lower maintenance costs for the cargo fleet as a result of the fleet´s recent renovation. Excluding the one-time charges related to the F-50 fleet grounding, total Maintenance and Repairs expenses increased by 8.9%. In terms of unit cost per ASK excluding the aforementioned one time charge, maintenance and repairs increased 3.3% from 0.52 to 0.54 in 1Q 2014.
Air traffic. Air traffic expense was $41.6 million in 1Q 2014, a 9.8% decrease over $46.2 million in 1Q 2013, primarily as a result of a reduction in passenger compensation costs related to baggage claims, flight delays and cancelations. In terms of unit cost per ASK, air traffic expenses decreased 14.5% from 0.49 in 1Q 2013 to 0.42 in 1Q 2014.
Sales and marketing. Sales and marketing expenses were $146.5 million in 1Q 2014, a $12.7 million increase over 1Q 2013, primarily as a result of higher costs related to promotions, miles program, redemptions with airline and commercial partners, as well as credit card commissions, expenses relate to distribution systems. In terms of unit cost per ASK, sales and marketing expenses increased 3.8%, from 1.43 in 1Q 2013 to 1.49 in 1Q 2014.
General, administrative and other. General, administrative and other expenses were $52.6 million in 1Q 2014, a 2.3% increase from 1Q 2013, mainly due to a larger provision for expenses related to doubtful accounts, as well as an increase in payments for professional service fees for consultancy and technical valuations. General, administrative and other expenses were partially offset by lower insurance premiums due to joint negotiation efforts at the holding level. In terms of unit cost per ASK, General, administrative and other expenses decreased by 3.0%, from 0.55 in 1Q 2013 to 0.53 in 1Q 2014.
Salaries, wages and benefits. Salaries, wages and benefits expenses were $160.7 million in 1Q 2014, a 3.4% decrease over $166.3 million in 1Q 2013, primarily as a result of the lower pension expense provision based on updated actuarial calculations, and was partially offset by an increase of 4.6% in the number of administrative personnel and 5.4% in operational staff. In terms of unit cost per ASK, salaries, wages and benefits decreased by 8.4% from 1.78 in 1Q 2013 to 1.63 in 1Q 2014.
Depreciation and amortization. Depreciation and amortization expense was $41.0 million in 1Q 2014, representing an increase of $8.9 million from 1Q 2013, primarily related to the higher depreciation of the new aircraft in the fleet (three A330 aircraft, one A321 aircraft and six ATR72 aircraft) associated to the change in the assets useful life implemented in the 4Q 2013. During the period we had an extraordinary expense of $ 2.5 million related to the amortization of return conditions of leased aircraft. Excluding these items the unit cost per ASK, depreciation and amortization expense increased 13.8.% to 0.39 in 1Q 2014 from 0.34 in 1Q 2013.
| EBITDAR Calculation excluding special items | ||||||
| in US$ Millions | 1Q-13 | 1Q-14 | Var % | |||
| Operating Revenues | 1,118.0 | 1,098.5 | ||||
| Operating Expenses | 675.4 | 712.0 | ||||
| Aircraft Fuel | 339.8 | 336.6 | ||||
| Operating Income - EBIT | 102.8 | 50.0 | -51.3% | |||
| Margin | 9.2% | 4.6% | ||||
| (+) Depreciation and amortization | 32.1 | 41.0 | ||||
| EBITDA | 134.9 | 91.0 | -32.5% | |||
| Margin | 12.1% | 8.3% | ||||
| (+) Aircraft Rentals | 65.9 | 70.8 | ||||
| EBITDAR | 200.8 | 161.8 | -19.4% | |||
| Margin | 18.0% | 14.7% | ||||
NON IFRS FINANCIAL MEASURE RECONCILIATION
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Reconciliation of Net Income excluding Special Items |
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| In USD$ Millions | 1Q-13 | 1Q-14 | Var % | ||||||||
| Net Income as Reported | $ | 77.2 | $ | 12.3 | -84.1 | % | |||||
| Special items (adjustments): | |||||||||||
| (-) Gain on sale of property and equipment | $ | (0.6 | ) | $ | (0.5 | ) | |||||
| (-) Derivative Instruments | $ | (5.5 | ) | $ | 2.7 | ||||||
| (-) Foreign exchange gain (loss) | $ | 13.6 | $ | (14.8 | ) | ||||||
| (-) Amortization expense related to fleet return conditions | $ | (2.5 | ) | ||||||||
| (-) Loss on aircraft grounding non cash expense | $ | - | $ | (4.2 | ) | ||||||
| Net Income Adjusted | $ | 69.8 | $ | 31.6.1 | -54.7 | % | |||||
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Reconciliation of Operating Cost per ASK excluding special items |
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| in US$ cents | 1Q-13 | 1Q-14 | Var % | ||||||||
| Total CASK as reported | 10.9 | 10.6 | -2.1 | % | |||||||
| Aircraft Fuel | 3.6 | 3.4 | |||||||||
| Total CASK excluding Fuel as reported | 7.2 | 7.2 | 0.0 | % | |||||||
| Gain on sale of property and equipment | (0.0 | ) | (0.0 | ) | |||||||
| Loss on aircraft grounding non cash expense | - | (0.0 | ) | ||||||||
| Total CASK excluding Fuel and special items | 7.22 | 7.15 | -1.0 | % | |||||||
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EBITDAR Calculation excluding special items |
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| in US$ Millions | 1Q-13 | 1Q-14 | Var % | ||||||||
| Operating Revenues as reported | 1.118.0 | 1.098.5 | |||||||||
| Operating Expenses | 675.4 | 712.0 | |||||||||
| Aircraft Fuel | 339.8 | 336.6 | |||||||||
| Operating Income as reported | 102.8 | 50.0 | -51.3 | % | |||||||
| (-) Gain on sale of property and equipment | (0.602 | ) | (0.5 | ) | |||||||
| (-) Loss on aircraft grounding non cash expense | - | (4.2 | ) | ||||||||
| Operating Income adjusted | 103.4 | 54.7 | -51.2 | % | |||||||
| (+) Depreciation and amortization | 32.1 | 41.0 | |||||||||
| EBITDA Adjusted | 135.5 | 95.7 | -32.5 | % | |||||||
| Margin | 12.1 | % | 8.7 | % | |||||||
| (+) Aircraft Rentals | 65.9 | 70.8 | |||||||||
| EBITDAR Adjusted | 201.4 | 166.5 | -19.4 | % | |||||||
| Margin | 18.0 | % | 15.2 | % | |||||||
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Results of Operations for the Quarters Ended March 31, 2013 and March 31, 2014 |
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| 1Q-13 | 1Q-14 | 1Q-13 | 1Q-14 | From 1Q-13 to 1Q-14 | ||||||||
| (In US$ thousands) | (As a percentage of total revenue) | (% change) | ||||||||||
| Operating revenue: | ||||||||||||
| Passenger | 937,533 | 917,253 | 83.9% | 83.5% | -2.2% | |||||||
| Cargo and other | 180,430 | 181,283 | 16.1% | 16.5% | 0.5% | |||||||
| Total operating revenues | 1,117,963 | 1,098,536 | 100.0% | 100.0% | -1.7% | |||||||
| Operating expenses: | ||||||||||||
| Flight Operations | 19,553 | 18,399 | 1.7% | 1.7% | -5.9% | |||||||
| Aircraft Fuel | 339,798 | 336,553 | 30.4% | 30.6% | -1.0% | |||||||
| Ground Operations | 78,596 | 87,569 | 7.0% | 8.0% | 11.4% | |||||||
| Aircraft rentals | 65,940 | 70,789 | 5.9% | 6.4% | 7.4% | |||||||
| Passenger services | 32,772 | 35,480 | 2.9% | 3.2% | 8.3% | |||||||
| Maintenance and repairs | 48,816 | 57,380 | 4.4% | 5.2% | 17.5% | |||||||
| Air Traffic | 46,178 | 41,638 | 4.1% | 3.8% | -9.8% | |||||||
| Sales and Marketing | 133,778 | 146,475 | 12.0% | 13.3% | 9.5% | |||||||
| General, administrative, and other | 51,356 | 52,540 | 4.6% | 4.8% | 2.3% | |||||||
| Salaries, wages and benefits | 166,307 | 160,670 | 14.9% | 14.6% | -3.4% | |||||||
| Depreciation and Amortization | 32,115 | 41,035 | 2.9% | 3.7% | 27.8% | |||||||
| Total operating expense | 1,015,209 | 1,048,528 | 90.8% | 95.4% | 3.3% | |||||||
| Operating Income | 102,754 | 50,008 | 9.2% | 4.6% | -51.3% | |||||||
| Other non-operating income (expense): | ||||||||||||
| Interest Expense | (24,585) | (25,340) | -2.2% | -2.3% | 3.1% | |||||||
| Interest Income | 3,991 | 2,716 | 0.4% | 0.2% | -31.9% | |||||||
| Derivative instruments | (5,543) | 2,674 | -0.5% | 0.2% | -148.2% | |||||||
| Foreign Exchange | 13,635 | (14,827) | 1.2% | -1.3% | 208.7% | |||||||
| Total other non-operating income (expense) | (12,502) | (34,777) | -1.1% | -3.2% | -178.2% | |||||||
| Profit before income taxes | 90,252 | 15,231 | 8.1% | 1.4% | -83.1% | |||||||
| Provision for income tax expense | -13,068 | -2,952 | -1.2% | -0.3% | 77.4% | |||||||
| Net Income | 77,184 | 12,279 | 6.9% | 1.1% | -84.1% | |||||||
| Interim Condensed Consolidated Statement of Financial Position | ||||
| (In USD thousands, except share and per share data) | ||||
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As of |
As of | |||
|
March 31, |
December, 31 | |||
| 2014 | 2013 | |||
| (Unaudited) | (Audited) | |||
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | 571,433 | 735,577 | ||
| Restricted cash | 2,065 | 23,538 | ||
| Available for sale securities | 12,825 | — | ||
| Accounts receivable, net of provision for doubtful accounts | 301,499 | 276,963 | ||
| Accounts receivable from related parties | 27,124 | 26,425 | ||
| Expendable spare parts and supplies, net of provision for obsolescence | 55,104 | 53,158 | ||
| Prepaid expenses | 49,300 | 46,745 | ||
| Assets held for sale | 14,563 | 7,448 | ||
| Deposits and other assets | 131,433 | 125,334 | ||
| Total current assets | 1,165,346 | 1,295,188 | ||
| Non-current assets: | ||||
| Available-for-sale securities | 2,261 | 14,878 | ||
| Deposits and other assets | 219,530 | 189,176 | ||
| Accounts receivable, net of provision for doubtful accounts | 39,526 | 32,441 | ||
| Intangible assets | 366,059 | 363,103 | ||
| Deferred tax assets | 50,273 | 50,893 | ||
| Property and equipment, net | 3,306,280 | 3,233,358 | ||
| Total non-current assets | 3,983,929 | 3,883,849 | ||
| Total assets | 5,149,275 | 5,179,037 | ||
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Interim Condensed Consolidated Statement of Financial Position (In USD thousands, except share and per share data) |
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| Current liabilities: | ||||
| Current portion of long-term debt | 327,446 | 314,165 | ||
| Accounts payable | 476,689 | 509,129 | ||
| Accounts payable to related parties | 9,097 | 7,553 | ||
| Accrued expenses | 153,069 | 134,938 | ||
| Provisions for legal claims | 16,100 | 14,984 | ||
| Provisions for return conditions | 36,975 | 33,033 | ||
| Employee benefits | 50,618 | 52,392 | ||
| Air traffic liability | 544,891 | 564,605 | ||
| Other liabilities | 24,654 | 27,432 | ||
| Total current liabilities | 1,639,539 | 1,658,231 | ||
| Non-current liabilities: | ||||
| Long-term debt | 1,990,485 | 1,951,330 | ||
| Accounts payable | 2,944 | 2,735 | ||
| Provisions for return conditions | 64,653 | 56,065 | ||
| Employee benefits | 259,105 | 276,284 | ||
| Deferred tax liabilities | 7,280 | 7,940 | ||
| Other liabilities non-current | 11,706 | 11,706 | ||
| Total non-current liabilities | 2,336,173 | 2,306,060 | ||
| Total liabilities | 3,975,712 | 3,964,291 | ||
| Equity: | ||||
| Common stock | 83,225 | 83,225 | ||
| Preferred stock | 41,398 | 41,398 | ||
| Additional paid-in capital on common stock | 236,342 | 236,342 | ||
| Additional paid-in capital on preferred stock | 467,498 | 467,498 | ||
| Retained earnings | 310,632 | 351,102 | ||
| Revaluation and other reserves | 28,857 | 28,857 | ||
| Total equity attributable to the Company | 1,167,952 | 1,208,422 | ||
| Non-controlling interest | 5,611 | 6,324 | ||
| Total equity | 1,173,563 | 1,214,746 | ||
| Total liabilities and equity | 5,149,275 | 5,179,037 | ||
Notes with regard to the statement of future expectations
This report contains statements of future expectations.
These may include words such as “expect”, “estimate”, “anticipate” “forecast”, “plan”, “believe” and similar expressions. These statements and the statements regarding the Company’s beliefs and expectations do not represent historical facts and are based on current plans, projections, estimates, forecasts and therefore you should not place undue reliance on them. Statements regarding future expectations involve certain risks and uncertainties. Forward-looking statements involve inherent known and unknown risks, uncertainties and other factors, many of which are outside of the Company’s control and difficult to predict. Avianca Holdings S.A. warns that a significant number of factors may cause the actual results to be materially different from those contained in any statement with regard to future expectations. Statements of this kind refer only to the date on which they are made, and the Company does not take responsibility for publicly updating any of them due to the occurrence of future or other events.
GLOSSARY OF OPERATING PERFORMANCE TERMS
This report contains terms relating to operating performance that are commonly used in the airline industry and are defined as follows:
“Aircraft utilization” represents the average number of block hours operated per day per aircraft for an aircraft fleet.
“Available seat kilometers,” or ASKs, represents aircraft seating capacity multiplied by the number of kilometers the seats are flown.
“Available ton kilometers,” or ATKs, represents cargo ton capacity multiplied by the number of kilometers the cargo is flown.
“Block hours” refers to the elapsed time between an aircraft leaving an airport gate and arriving at an airport gate.
“CASK excluding fuel” represents operating expenses other than fuel divided by available seat kilometers (ASKs).
“Code share alliance” refers to our code share agreements with other airlines with whom we have business arrangements to share the same flight. A seat can be purchased on one airline but is actually operated by a cooperating airline under a different flight number or code. The term “code” refers to the identifier used in flight schedules, generally the two-character IATA airline designator code and flight number. Code share alliances allow greater access to cities through a given airline’s network without having to offer extra flights, and makes connections simpler by allowing single bookings across multiple planes.
“Cost per available seat kilometer,” or CASK, represents operating expenses divided by available seat kilometers (ASKs).
“Load factor” represents the percentage of aircraft seating capacity that is actually utilized and is calculated by dividing revenue passenger kilometers by available seat kilometers (ASKs).
“Operating revenue per available seat kilometer,” or RASK, represents operating revenue divided by available seat kilometers (ASKs).
“Revenue passenger kilometers,” or RPKs, represent the number of kilometers flown by revenue passengers.
“Revenue passengers” represents the total number of paying passengers (which do not include passengers redeeming LifeMiles (previously known as AviancaPlus or Distancia) frequent flyer miles or other travel awards) flown on all flight segments (with each connecting segment being considered a separate flight segment).
“Revenue ton kilometers,” or RTKs, represents the total cargo tonnage uplifted multiplied by the number of kilometers the cargo is flown.
“Technical dispatch reliability” represents the percentage of scheduled flights that are not delayed at departure more than 15 minutes or cancelled, in each case due to technical problems.
“Yield” represents the average amount one passenger pays to fly one kilometer, or passenger revenue divided by revenue passenger kilometers (RPKs).
1Q 2014 Conference Call
Date: May 16, 2014
English Call
Registration Link: http://www.yourconferencecenter.com/r.aspx?p=1&a=UuUXIQdYXmkhLp
Time: 9:00 am Colombian Time (10:00 am New York)
Dial in Colombia: 01 800 9 156 930
Dial In US: 1 (888) 771-4384
Dial in Brazil: 0800 761 0711
Passcode: 6473 048#
PIN: Will be provided once the online registration is submitted.
This event will be held through an audio conference call and an online presentation. To correctly follow the presentation please download the PDF file from the corporate website www.aviancaholdings.com under the Investor Relations section, available on May 16th.
Spanish Call
Registration Link: http://www.yourconferencecenter.com/r.aspx?p=1&a=UIOjogOVuuvYzf
Time: 10:00 am Colombian Time (11:00 am New York)
Dial in Colombia: 01 800 9 156 930
Dial In US: 1 (888) 771-4384
Dial in Brazil: 0800 761 0711
Passcode: 6887 763#
PIN: Will be provided once the online registration is submitted.
This event will be held through an audio conference call and an online presentation. To correctly follow the presentation please download the PDF file from the corporate website www.aviancaholdings.com under the Investor Relations section, available on May 16th.