Volaris Reports Record Second Quarter 2016 Results: 35% Adjusted EBITDAR Margin

MEXICO CITY--()--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 second quarter 2016.

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

Second Quarter 2016 Highlights

  • Total operating revenues reached Ps.5,131 million for the second quarter, an increase of 25.2% year over year.
  • Non-ticket revenues were Ps.1,317 million for the second quarter, an increase of 34.7% year over year. Non-ticket revenues per passenger for the second quarter were Ps.362, increasing 6.6% year over year.
  • Total operating revenues per available seat mile (TRASM) rose to Ps.128.9 cents for the second quarter, an increase of 4.8% year over year.
  • Operating expenses per available seat mile (CASM) were Ps.119.2 cents for the second quarter, an increase of 5.9% year over year.
  • Adjusted EBITDAR was Ps.1,819 million for the second quarter, an increase of 42.1% year over year. Adjusted EBITDAR margin was 35.5% for the second quarter, a margin expansion of 4.3 percentage points.
  • Operating income was Ps.388 million for the second quarter, with an operating margin of 7.6%, equal to a year over year operating margin decrease of 0.9 percentage points.
  • Net income was Ps.935 million (Ps.0.92 per share / US$0.49 per ADS) for the second quarter, with a net margin of 18.2%, a year over year margin increase of 9.6 percentage points.
  • Net increase of cash and cash equivalents was Ps.564 million for the second quarter. As of June 30, 2016, unrestricted cash and cash equivalents were Ps.6,930 million.

Volaris´ CEO Enrique Beltranena commented: “Volaris’ performance highlights the resilience of its ULCC model that combines high growth, expanding unit revenue, and managing unit costs down. These results reflect our ability to stimulate demand with low base fares, successfully switch bus passengers to air travel and further unbundle our product offering. We will work to continue balancing our growth with profitability to create shareholder value.”

Solid Demand Supports Traffic Volume Growth, Despite Exchange Rate and Fuel Price Volatility

  • Air traffic volume increase: The Mexican DGAC reported overall passenger volume growth for Mexican carriers of 9.0% year over year in April and May. Domestic passenger volume increased 9.2%, while international passenger volume increased 8.2%.
  • Exchange rate volatility: The Mexican peso depreciated 17.9% year over year against the US dollar, from an average of Ps.15.31 pesos per US dollar in the second quarter 2015 to Ps.18.05 pesos per US dollar during the second quarter 2016.
  • Lower fuel prices: The average economic fuel cost per gallon decreased 8.6% to Ps.28.3 per gallon (US$1.5) in the second quarter 2016, year over year.

Unit Revenue Improvements Driven by Volume and Non-Ticket Revenue Expansion, Despite Adverse Seasonality

  • Passenger traffic stimulation: Volaris booked 3.6 million passengers in the second quarter of 2016, up 26.4% year over year. Volaris traffic (measured in terms of revenue passenger miles, or RPMs) increased 24.0% for the same period.
  • Unit revenue improvement and demand driven capacity growth: For the second quarter of 2016, TRASM increased 4.8%, while yield decreased 1.5%, year over year. During the second quarter, in terms of ASMs, domestic capacity grew 19.3%, while international capacity increased 19.9% responding to a strong demand from both markets. This was accomplished despite the effects of adverse seasonality due to high traffic in Holy and Easter weeks falling in the first quarter, unlike 2015 when they fell predominantly in the second quarter. System load factor during the quarter increased 3.2 percentage points year over year to 86.1%.
  • Non-ticket revenues growth: Non-ticket revenues and non-ticket revenues per passenger increased 34.7% and 6.6% year over year for the second quarter of 2016, respectively. The Company has been expanding its product offering and improving its presence in mobile, web and airport kiosks, while more dynamically pricing its ancillaries.
  • New routes: In the second quarter 2016, Volaris launched eight new routes, six domestic and two international.

Exchange Rate Pressures Challenge Fuel Savings

In the second quarter 2016, Volaris continued to experience pressure in US-dollar denominated costs, such as aircraft and engine rent expenses, international airport costs, and maintenance expenses due to the depreciation of the Mexican peso. The CASM for the second quarter was Ps.119.2 cents, a 5.9% increase compared to the second quarter 2015, mainly driven by FX pressures.

Young and Fuel Efficient Fleet Supporting Lower Operating Costs

During the second quarter, the Company incorporated five additional aircraft comprised of three A320s and two A321s. As of June 30, 2016, Volaris fleet was composed of 64 aircraft (18 A319s, 42 A320s and 4 A321s), with an average age of 4.5 years. At the end of the second quarter 2016 Volaris’ fleet had an average of 171 seats per aircraft, an increase from 168 seats in the second quarter of 2015, and 51% of our seats were in sharklet-equipped aircraft.

Cash Flow Generation, Solid Balance Sheet and Good Liquidity

The net increase in cash and cash equivalents was equal to Ps.564 million during the second quarter, mainly driven by positive operating cash flow of Ps.194 million and by net foreign exchange differences on cash balance by Ps.409 million. As of June 30, 2016, Volaris’ unrestricted cash and cash equivalents balance was Ps.6,930 million. Volaris registered negative net debt (or a positive net cash position) of Ps.6,109 million and total equity of Ps.8,611 million.

Active in Fuel Risk Management

Volaris remains active in its fuel risk management program. Volaris utilized call options to hedge 62% of its second quarter 2016 fuel consumption, at an average strike price of US $1.95 per gallon, which combined with the 38% unhedged consumption, resulted in a blended average economic fuel cost of US$1.50 per gallon.

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:

Presenters for the Company:     Mr. Enrique Beltranena, CEO
Mr. Fernando Suárez, CFO
 
Date: Friday, July 22, 2016
Time: 10:00 am U.S. EDT (9:00 am Mexico City Time)
United States dial in (toll free): 1-800-311-9408
Mexico dial in (toll free): 0-1-800-847-7666
Brazil dial in (toll free): 0800-282-5781
International dial in: +1-334-323-7224
Participant entry number: 83342
Webcast will be available on our website:

https://www.webcaster4.com/Webcast/Page/1174/15984

 

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, 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 154 and its fleet from four to 64 aircraft. Volaris offers more than 286 daily flight segments on routes that connect 40 cities in Mexico and 25 cities in the United States and Central America with the youngest 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

 

Three months

 

 

ended June 30,

Three months

Three months

Unaudited 2016 ended June 30, ended June 30, Variance
(In Mexican pesos, except otherwise indicated) (US Dollars)* 2016 2015 (%)
Total operating revenues (millions) 271 5,131 4,099 25.2%
Total operating expenses (millons) 251 4,743 3,750 26.5%
EBIT (millions) 21 388 349 11.2%
EBIT margin 7.6% 7.6% 8.5% (0.9) pp
Adjusted EBITDA (millions) 28 526 474 11.0%
Adjusted EBITDA margin 10.3% 10.3% 11.6% (1.3) pp
Adjusted EBITDAR (millions) 96 1,819 1,281 42.1%
Adjusted EBITDAR margin 35.5% 35.5% 31.2% 4.3 pp
Net income (millions) 49 935 351 >100%
Net margin 18.2% 18.2% 8.6% 9.6 pp
Earnings per share:
Basic (pesos) 0.05 0.92 0.35 >100%
Diluted (pesos) 0.05 0.92 0.35 >100%
Earnings per ADS:
Basic (pesos) 0.49 9.24 3.47 >100%
Diluted (pesos) 0.49 9.24 3.47 >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)

- 3,980 3,332 19.4%
Domestic - 2,819 2,364 19.3%
International - 1,161 969 19.9%

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

- 3,428 2,764 24.0%
Domestic

-

2,421 1,944 24.6%
International - 1,007 820 22.8%

Load factor(2)

- 86.1% 82.9% 3.2 pp
Domestic - 85.9% 82.2% 3.7 pp
International   -   86.7%   84.5%   2.2 pp

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

6.8 128.9 123.0 4.8%

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

5.1 95.8 93.7 2.3%

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

5.9 111.3 113.0 (1.5%)

Average fare(2)

55.6 1,052 1,087 (3.2%)

Non-ticket revenue per passenger (1)

19.1 362 339 6.6%

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

6.3 119.2 112.5 5.9%

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

- 6.3* 7.2* (12.8%)

CASM ex fuel (cents)(1)

4.5 85.0 76.3 11.4%

CASM ex fuel (US cents)(1)

  -   4.5*   4.9*   (8.3%)

Booked passengers (thousands)(1)

- 3,640 2,880 26.4%

Departures(1)

- 24,919 21,187 17.6%

Block hours(1)

- 65,520 55,067 19.0%

Fuel gallons consumed (millions)

- 48.0 39.0 23.1%
Average economic fuel cost per gallon 1.5 28.34 31.01 (8.6%)
Aircraft at end of period - 64 53 20.8%
Average aircraft utilization (block hours) - 12.5 12.5 0.4%
Average exchange rate - 18.05 15.31 17.9%
End of period exchange rate   -   18.91   15.57   21.5%
*Peso amounts were converted to U.S. dollars at end of period exchange rate 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

 

Six months

ended June 30,

Six months

Six months

Unaudited 2016

ended June 30,

ended June 30,

Variance
(In Mexican pesos, except otherwise indicated) (US Dollars)*

2016

2015

(%)
Total operating revenues (millions) 545 10,313 7,867 31.1%
Total operating expenses (millons) 481 9,089 7,172 26.7%
EBIT (millions) 65 1,224 695 76.0%
EBIT margin 11.9% 11.9% 8.8% 3.1 pp
Adjusted EBITDA (millions) 78 1,482 923 60.5%
Adjusted EBITDA margin 14.4% 14.4% 11.7% 2.7 pp
Adjusted EBITDAR (millions) 211 3,994 2,485 60.7%
Adjusted EBITDAR margin 38.7% 38.7% 31.6% 7.1 pp
Net income (millions) 81 1,536 658 >100%
Net margin 14.9% 14.9% 8.4% 6.5 pp
Earnings per share:
Basic (pesos) 0.08 1.52 0.65 >100%
Diluted (pesos) 0.08 1.52 0.65 >100%
Earnings per ADS:
Basic (pesos) 0.80 15.18 6.50 >100%
Diluted (pesos) 0.80 15.18 6.50 >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)

- 7,872 6,375 23.5%
Domestic - 5,549 4,489 23.6%
International - 2,323 1,886 23.2%

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

- 6,735 5,199 29.5%
Domestic - 4,739 3,663 29.4%

International

- 1,996 1,536 29.9%

Load factor(2)

- 85.6% 81.5% 4.1 pp
Domestic - 85.4% 81.6% 3.8 pp
International   -   85.9%   81.3%   4.6 pp

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

6.9 131.0 123.4 6.2%

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

5.2 98.1 94.8 3.4%

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

6.1 114.6 116.3 (1.4%)

Average fare(2)

58 1,095 1,123 (2.5%)

Non-ticket revenue per passenger (1)

19.4 367 338 8.4%

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

6.1 115.5 112.5 2.6%

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

-

6.1* 7.2* (15.5%)

CASM ex fuel (cents)(1)

4.5

85.3 77.1 10.7%

CASM ex fuel (US cents)(1)

  -   4.5*   4.9*   (8.9%)

Booked passengers (thousands)(1)

- 7,070 5,391 31.1%

Departures(1)

- 48,980 40,500 20.9%

Block hours(1)

- 130,389 105,763 23.3%
Fuel gallons consumed (millions) - 93.8 74.3 26.2%
Average economic fuel cost per gallon 1.3 25.3 30.4 (16.8%)
Aircraft at end of period - 64 53 20.8%
Average aircraft utilization (block hours) - 12.8 12.3 4.2%
Average exchange rate - 18.05 15.31 17.9%
End of period exchange rate   -   18.91   15.57   21.5%
*Peso amounts were converted to U.S. dollars at end of period exchange rate 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

 
Three months
ended June 30, Three months Three months
Unaudited 2016 ended June 30, ended June 30, Variance
(In millions of Mexican pesos) (US Dollars)* 2016 2015 (%)
Operating revenues:
Passenger 202 3,814 3,122 22.2%
Non-ticket 70 1,317 977 34.7%
271 5,131 4,099 25.2%
 
Other operating income (9) (174) (37) >100%
Fuel 72 1,360 1,209 12.5%
Aircraft and engine rent expenses 68 1,293 807 60.3%
Landing, take-off and navigation expenses 38 724 607 19.3%
Salaries and benefits 31 580 448 29.3%
Maintenance expenses 16 306 198 54.5%
Sales, marketing and distribution expenses 16 300 232 29.2%
Other operating expenses 11 216 162 33.5%
Depreciation and amortization 7 138 125 10.5%
Operating expenses 251 4,743 3,750 26.5%
 
Operating income 21 388 349 11.2%
 
Finance income 1 20 12 56.8%
Finance cost - (8) (6) 40.1%
Exchange gains, net 49 923 146 >100%
Comprehensive financing result 49 935 153 >100%
 
Income before income tax 70 1,323 502 >100%
Income tax expense (21) (388) (151) >100%
Net income 49 935 351 >100%
 
Attribution of net income:
Equity holders of the parent 49 935 351 >100%
Non-controlling interest - - - 0%
Net income   49   935   351   >100%
*Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only.
 
       

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

Consolidated Statement of Operations

 

Six months

ended June 30,

Six months

Six months

Unaudited

2016

ended June 30,

ended June 30,

Variance
(In millions of Mexican pesos) (US Dollars)*

2016

2015

(%)
Operating revenues:
Passenger 408 7,720 6,044 27.7%
Non-ticket 137 2,593 1,823 42.2%
545 10,313 7,867 31.1%
 
Other operating income (20) (369) (61) >100%
Fuel 126 2,374 2,260 5.0%
Aircraft and engine rent expenses 133 2,513 1,562 60.9%
Landing, take-off and navigation expenses 80 1,514 1,180 28.3%
Salaries and benefits 60 1,143 872 31.1%
Maintenance expenses 34 646 379 70.3%
Sales, marketing and distribution expenses 31 595 448 32.9%
Other operating expenses 22 416 304 36.9%
Depreciation and amortization 14 258 228 13.1%
Operating expenses 481 9,089 7,172 26.7%
 
Operating income 65 1,224 695 76.0%
 
Finance income 3 54 22 >100%
Finance cost (1) (15) (10) 51.9%
Exchange gains, net 49 932 233 >100%
Comprehensive financing result 51 971 244 >100%
 
Income before income tax 116 2,195 939 >100%
Income tax expense (35) (658) (282) >100%
Net income 81 1,536 658 >100%
 
Attribution of net income:
Equity holders of the parent 81 1,536 658 >100%
Non-controlling interest - - - 0%
Net income   81   1,536   658   >100%
*Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only.
 

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

The Company is providing a reconciliation of GAAP financial information to non-GAAP financial information as it believes that non-GAAP financial measures provide management and investors the ability to measure the performance of the Company on a consistent basis. These non-GAAP financial measures have limitations as an analytical tool.

Unaudited

Three months
ended June 30,
2016

 

Three months
ended June 30,
2016

 

Three months
ended June 30,
2015

(In millions of Mexican pesos) (US Dollars)*
Reconciliation:
Net (loss) income 49 935 351
Plus (minus):
Finance cost - 8 6
Finance income (1) (20) (12)
Provision for income tax 21 388 151
Depreciation and amortization 7 138 125
EBITDA 76 1,449 620
Exchange (gain) loss, net (49) (923) (146)
Adjusted EBITDA 28 526 474
Aircraft and engine rent expense 68 1,293 807
Adjusted EBITDAR 96   1,819   1,281
 
     
Unaudited

Six months
ended June 30,
2016

Six months
ended June 30,
2016

Six months
ended June 30,
2015

(In millions of Mexican pesos) (US Dollars)*
Reconciliation:
Net (loss) income 81 1,536 658
Plus (minus):
Finance cost 1 15 10
Finance income (3) (54) (22)
Provision for income tax 35 658 282
Depreciation and amortization 14 258 228
EBITDA 128 2,414 1,156
Exchange (gain) loss, net (49) (932) (233)
Adjusted EBITDA 78 1,482 923
Aircraft and engine rent expense 133 2,513 1,562
Adjusted EBITDAR   211   3,994   2,485

*Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only

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

Consolidated Statement of Financial Position

 
June 30, 2016
Unaudited June 30, 2016 December 31, 2015
(In millions of Mexican pesos) (US Dollars)* Unaudited Audited
Assets
Cash and cash equivalents 366 6,930 5,157
Accounts receivable 49 926 464
Inventories 10 185 163
Prepaid expenses and other current assets 25 482 585
Financial instruments 8 155 10
Guarantee deposits 62 1,170 861
Total current assets 521 9,848 7,241
Rotable spare parts, furniture and equipment, net 99 1,864 2,550
Intangible assets, net 5 98 95
Financial instruments 26 486 69
Deferred income tax 29 544 545
Guarantee deposits 290 5,485 4,704
Other assets 3 53 58
Total non-current assets 451 8,531 8,020
Total assets 972 18,380 15,261
Liabilities
Unearned transportation revenue 159 3,006 1,957
Accounts payable 36 682 795
Accrued liabilities 102 1,937 1,471
Other taxes and fees payable 69 1,309 1,107
Income taxes payable 35 654 338
Financial instruments 2 39 44
Financial debt 21 395 1,371
Other liabilities 1 17 19
Total short-term liabilities 425 8,039 7,103
Financial instruments - - 11
Financial debt 22 425 220
Accrued liabilities 12 222 157
Other liabilities 4 80 49
Employee benefits 1 12 10
Deferred income taxes 52 991 885
Total long-term liabilities 91 1,729 1,333
Total liabilities 517 9,769 8,436
Equity
Capital stock 157 2,974 2,974
Treasury shares (5) (95) (91)
Contributions for future capital increases - - -
Legal reserve 2 38 38
Additional paid-in capital 95 1,792 1,791
Retained earnings 209 3,945 2,408
Accumulated other comprehensive losses (2) (43) (295)
Total equity 455 8,611 6,825
Total liabilities and equity 972 18,380 15,261
 
Total shares outstanding fully diluted       1,011,876,677   1,011,876,677
*Peso amounts were converted to U.S. dollars at end of period exchange rate 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

 

Three months

ended June 30,

Three months

Three months

Unaudited

2016

ended June 30,

ended June 30,

(In millions of Mexican pesos) (US Dollars)*

2016

2015

 
Net cash flow provided by operating activities 10 194 947
Net cash flow provided by (used in) investing activities 17 331 (281)
Net cash flow (used in) provided by financing activities (20) (370) 151
Increase in cash and cash equivalents 8 155 817
Net foreign exchange differences on cash balance 22 409 55
Cash and cash equivalents at beginning of period 337 6,366 3,156
Cash and cash equivalents at end of period   366   6,930   4,028
*Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only
     

Six months

ended June 30,

Six months

Six months

Unaudited

2016

ended June 30,

ended June 30,

(In millions of Mexican pesos) (US Dollars)*

2016

2015

 
Net cash flow provided by operating activities 81 1,523 1,896
Net cash flow provided by (used in) investing activities 41 766 (331)
Net cash flow (used in) provided by financing activities (49) (919) 115
Increase in cash and cash equivalents 72 1,371 1,679
Net foreign exchange differences on cash balance 21 402 83
Cash and cash equivalents at beginning of period 273 5,157 2,265
Cash and cash equivalents at end of period   366   6,930   4,028
*Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only
 

Contacts

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

Contacts

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